Final answer:
The Stock Market Crash of 1929 triggered the Great Depression due to speculative practices, such as buying stocks on margin, and was compounded by pre-existing economic weaknesses. The crash devastated the banking system and wiped out the savings of many, while the ensuing loss of public confidence exacerbated the economic decline.
Step-by-step explanation:
The long-term crash referred to in the question is the Stock Market Crash of 1929, which precipitated the Great Depression. This catastrophic event was the result of a decade-long period where easy credit allowed for rampant speculation and purchasing of stocks on margin, meaning that investors borrowed heavily to fund their investments. When stock prices began to tumble, those who had purchased stocks on margin were left with enormous debts that could not be covered by the plummeting value of their stocks, leading to mass sell-offs and further plunging the stock market. The crash was not solely caused by stock price declines; it was also due to the underlying weaknesses in the economy, such as a pre-existing agricultural recession, income inequality, and a banking system laden with underregulated practices and excessive stock market investments.
The impact of the crash of 1929 was profound and far-reaching. Banks that had invested heavily in the stock market suffered huge losses, which led to bank failures and, in turn, the loss of savings for bank depositors. Furthermore, the banking system's collapse curtailed the ability of businesses and farms to obtain loans, exacerbating the economic downturn. The stock market crash, therefore, acted as a tipping point, revealing and exacerbating the pre-existing fragilities in the economy.
The public's confidence, which had been unwavering during the bullish 1920s, was severely shattered by the market plunge. The social and psychological impact of the crash significantly contributed to the panic and the subsequent economic decline. It was this loss of confidence, coupled with the structural economic issues, that ensured the crash had lasting and devastating effects, resulting in the Great Depression, which would endure throughout the 1930s.