The Great Gatsby Stock Market Crash Essay

F. Scott Fitzgerald delineated the Roaring Twenties in The Great Gatsby as “the parties were bigger. The pace was faster, the shows were broader, the buildings were higher, the morals were looser, and the liquor was cheaper.” It was the era marked by social changes and splendous parties and self-made millionaires. However, unprecedented to Fitzgerald and many of his contemporaries was that said glamourous lifestyle was built on a precarious foundation. When the stock market crashed in 1929, it put a period to the beguiling era and opened Americans to a horrid epoch. Yet, in actuality, the Stock market crash is an inexorable consequence of a time so reckless such as the Roaring Twenties. Some identified causes of the eventual crash are margin buying, overproduction of goods, and banks investing in stocks with depositors’ funds.
Margin buying is a practice originated from the Roaring Twenties and that hastens the eventual decline of the

economy.

In an era of superficial prosperity and indulgence, most Americans “threw all care to the wind” (Danzer, Klor de Alva, Krieger, Wilson, Woloch). Ron Chernow observed that “in the 1920s you could buy stocks on margin. You could put 10 percent down and borrow the rest against your stocks.” Buying on margin is exactly what reflected the American public of the 20s- reckless and optimistic. By using leverage to invest, buyers can maximize their profits through the stock in a bull market ("Buying Stock on Margin"). This idea of using brokers’ money to gain profit for themselves appealed to many Americans. The great bull market that had lasted for six years further instigated irrational exuberance- or the extreme confidence in investors that they overlooked the degrading economic fundamentals- in the American public (Shiller). However, this overvaluation proved to be deadly. Margin loan, like a double-edged sword, eventually stabbed Americans in the back- and stabbed them hard. The

cult of carelessness came to a screeching halt on October 29, 1929 when the bear market hit. Stocks which had worthed thousands of dollars became valueless, but investors had yet to pay off their loans from banks. While it was possible for them to sell the goods and properties they owned to pay off debts to banks and brokers, most household products were bought on credit. In essence, most of their possessions did not fully belong to them. Henceforth, not only were they unable to trade those merchandises for capitals, companies confiscated the goods when families were unable to pay for their installment plans, which wrought upon most households great inconvenience, and some even went homeless or bankrupt. The Roaring Twenties marked by its corpulence and extravagance left the country in a day, without a vestige of once affluence.