posted by Mike on .
why did the Versailles treaty failed to be ratified? I understand it was due in part to the senate, but what I don't understand is why the senate failed to ratify it.
The answer is undoubtedly in here -- be sure to read #s 1-3 and 5.
I was wondering why the eceonomy was so bad in 1929? I searched the web but not sure what to believe.
This site has an excellent explanation.
That was helpul but i guess i dosent really answer my question as to why the stock market crashed, or maybe i just don't see it. wondering if u could explain.
People borrowed money to buy stocks when they were very expensive. But some of these companies cooked their books and committed fraud. When people began realizing this, they started selling their stocks -- so of course, the prices went down, down, down. Banks closed. Businesses and individuals couldn't get more credit. Those who had borrowed money had to pay it back -- but since their stocks had lost much of their value, they were broke and couldn't repay their loans.
See this quote from the above site.
"For every dollar invested, a margin user would borrow 9 dollars worth of stock. Because of this leverage, if a stock went up 1%, the investor would make 10%! This also works the other way around, exaggerating even minor losses. If a stock drops too much, a margin holder could lose all of their money AND owe their broker money as well. "
Remember -- that a stock is only worth what investors will pay for it. Investors tend to pay high prices when they think the company has a good future and the price keeps going up. When the public sees that a company isn't going to be as profitable as they hope, they sell their stock, thus causing the prices to fall.
When you sell anything, you have to have a buyer. If nobody wants what you have to sell, then the price goes down -- sometimes to nothing.