The 交易系统Role of Speculation and Market Bubble

The 1920s were marked by unprecedented optimism and rapid economic growth, which fueled a wave of speculative investing in the stock market. Many investors borrowed heavily to purchase stocks on margin, believing that prices would continue to rise indefinitely. This speculative frenzy created a dangerous bubble that eventually burst with the infamous stock market crash of October 1929. The excessive risk-taking and lack of understanding about the true value of assets contributed significantly to the financial instability that followed.

Lack of Regulatory Oversight

At the time, the United States lacked comprehensive financial regulations to monitor and control risky practices within the banking and securities sectors. Banks were allowed to engage in high-risk investments without proper supervision, and there was no central authority to enforce consistent standards across financial institutions. The absence of federal deposit insurance meant that when banks failed, depositors lost their savings with little recourse. This regulatory gap left the entire financial system vulnerable to collapse.

Bank Failures and Loss of Public Confidence

As the crisis deepened, numerous banks collapsed due to bad loans and panic withdrawals by customers. The lack of liquidity in the banking system caused widespread runs on banks, where people rushed to withdraw their money out of fear. This created a vicious cycle: as banks failed, public confidence plummeted further, leading to even more withdrawals and eventual closures. The resulting loss of trust in financial institutions had long-lasting effects on how Americans viewed their banking system.

Policy Responses and Long-Term Impact

In response to the devastation caused by the Great Depression, the U.S. government introduced sweeping reforms such as the creation of the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC). These institutions aimed to restore public trust and regulate financial markets more effectively. The lessons learned from this period laid the foundation for modern financial safety nets and regulatory frameworks designed to prevent future crises. The Great Depression fundamentally changed the relationship between government and finance in America.

Conclusion

The collapse of the financial system during the Great Depression was the result of multiple interconnected failures—speculative excesses, weak regulation, and institutional weaknesses. Understanding these causes is essential for recognizing the importance of sound financial governance and preventive measures in maintaining economic stability today.