The Stock Market Crash of 1929 occurred on October 29, 1929, when Wall Street investors traded some 16 million shares on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors. In the aftermath of that event, sometimes called “Black Tuesday,” America and the rest of the industrialized world spiraled downward into the Great Depression, the deepest and longest-lasting economic downturn in the history of the Western industrialized world up to that time.
What Caused the 1929 Stock Market Crash?
Stock Market Crash of 1929
During the 1920s, the U.S. stock market underwent rapid expansion, reaching its peak in August 1929 after a period of wild speculation in the Roaring Twenties. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value.
Among the other causes of the stock market crash of 1929 were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated.
Did you know? The New York Stock Exchange was founded in 1817, although its origins date back to 1792 when a group of stockbrokers and merchants signed an agreement under a buttonwood tree on Wall Street.
Stock prices began to decline in September and early October 1929, and on October 18 a big drop in stock prices began. Panic soon set in, and on October 24, Black Thursday, a record 12,894,650 shares were traded. Investment companies and leading bankers attempted to stabilize the market by buying up great blocks of stock, producing a moderate rally on Friday.
On Monday, however, the storm broke anew, and the market went into free fall. Black Monday was followed by Black Tuesday—October 29, 1929—during which stock prices collapsed completely and 16,410,030 shares were traded on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors, and stock tickers ran hours behind because the machinery could not handle the tremendous volume of trading.
Effects of the 1929 Stock Market Crash: The Great Depression
After October 29, 1929, stock prices had nowhere to go but up, so there was considerable recovery during succeeding weeks. Overall, however, prices continued to drop as the United States slumped into the Great Depression, and by 1932 stocks were worth only about 20 percent of their value in the summer of 1929.
The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse which it was also a symptom. Stock prices continued to drop through 1932 when the Dow Jones Industrial Average—a widely-used benchmark for blue-chip stocks in the United States—closed at 41.22, its lowest value of the 20th century, 89 percent below its peak.
Here's How the Great Depression Brought on Social Security
By 1933, nearly half of America’s banks had failed, and unemployment was approaching 15 million people or 30 percent of the U.S. workforce. The Dow Jones Industrial Average would not return to its pre-1929 heights until November of 1954, about 25 years later.
African Americans were particularly hard hit, as they were the “last hired, first fired.” Women during the Great Depression fared slightly better, as traditionally female jobs of the era like teaching and nursing were more insulated than those dependent on fluctuating markets.
Life for the average family during the Great Depression was difficult. Storms and a severe drought in the Southern Plains ruined crops, causing the area to be nicknamed the Dust Bowl. “Okies,” as fleeing residents were called, moved to big cities looking for work.
Did you know? The Great Depression helped bring an end to Prohibition. Politicians believed legalizing the consumption of alcohol could help create jobs and stimulate the economy.
The relief and reform measures in the New Deal programs enacted by the administration of President Franklin D. Roosevelt helped lessen the worst effects of the Great Depression; however, the U.S. economy would not fully turn around until after 1939, when World War II revitalized American industry.
On October 29, 1929, the United States stock market crashed in an event known as Black Tuesday. This began a chain of events that led to the Great Depression, a 10-year economic slump that affected all industrialized countries in the world.
Simply put, the stock market crash of 1929 caused the Great Depression because everyone lost money. Investors and businesses both put significant amounts of money into the market, and when it crashed, tremendous amounts of money were lost. Businesses closed and people lost their savings.
The epic boom ended in a cataclysmic bust. On Black Monday, October 28, 1929, the Dow declined nearly 13 percent. On the following day, Black Tuesday, the market dropped nearly 12 percent. By mid-November, the Dow had lost almost half of its value.
Black Thursday, Thursday, October 24, 1929, the first day of the stock market crash of 1929, a catastrophic decline in the stock market of the United States that immediately preceded the worldwide Great Depression. That stock market crash (also called the Great Crash) is still considered the worst one in history.
Economic downturns hurt the optimistic bullish investors but reward the pessimistic bearish investors. Several individuals who bet against or “shorted” the market became rich or richer. Percy Rockefeller, William Danforth, and Joseph P. Kennedy made millions shorting stocks at this time.
Among the more prominent causes were the period of rampant speculation (those who had bought stocks on margin not only lost the value of their investment, they also owed money to the entities that had granted the loans for the stock purchases), tightening of credit by the Federal Reserve (in August 1929 the discount ...
Black Tuesday marked the beginning of the Great Depression, which lasted until the beginning of World War II. Causes of Black Tuesday included too much debt used to buy stocks, global protectionist policies, and slowing economic growth.
The crash lasted until 1932, resulting in the Great Depression, a time in which stocks lost nearly 90% of their value. The Dow didn't fully recover until November 1954.
Despite all the President's efforts and the courage of the American people, the Depression hung on until 1941, when America's involvement in the Second World War resulted in the drafting of young men into military service, and the creation of millions of jobs in defense and war industries.
In 1929 as the Wall Street Crash. led to a worldwide depression. Germany suffered more than any other nation as a result of the recall of US loans, which caused its economy to collapse. Unemployment rocketed, poverty soared and Germans became desperate.
Assuming the Presidency at the depth of the Great Depression, Franklin D. Roosevelt helped the American people regain faith in themselves. He brought hope as he promised prompt, vigorous action, and asserted in his Inaugural Address, “the only thing we have to fear is fear itself.”
As consumer confidence vanished in the wake of the stock market crash, the downturn in spending and investment led factories and other businesses to slow down production and begin firing their workers. For those who were lucky enough to remain employed, wages fell and buying power decreased.
Those wealthy whose wealth was all in the stock market or was highly leveraged, lost everything. However, not every wealthy person had all their assets in the stock market or leveraged with debt. Many wealthy people owned land and buildings, all debt free.Many had lots of cash.
GM delivered a profit in every year of the Great Depression, and Chrysler incurred a loss in only one year. Prior to the Great Depression, the automobile market had been split three ways. GM and Ford Motor Company each enjoyed a one-third market share.
Stock market crash of 1929. The failure of banks, which was the impact of the stock market crash as more people withdrew their savings from the banks leading to closure. Reduction in purchases due to diminished savings.
In addition to the Federal Reserve's questionable policies and misguided banking practices, three primary reasons for the collapse of the stock market were international economic woes, poor income distribution, and the psychology of public confidence.
The beginning ofAmerica's "Great Depression" is often cited as the dramatic crash of the stock market on "Black Thursday," October 24, 1929 when 16 million shares of stock were quickly sold by panicking investors who had lost faith in the American economy.
The stock market crash of 1929 happened because the share prices had been rising at an unsustainable pace in the years prior to the crash. This was due to the overconfidence of the investors in sustained economic growth as well as the practice of buying shares on the margin.
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