The Stock Market Crash of 1929
The 1929 Stock Market Crash is well known as the
most devastating crash in United States history.
Here's a look at this historic event, which marked
the beginning of the Great Depression.
When the stock market crashed in 1929, it didn’t happen on a single day. Instead, the stock market
continued to plummet over the cour of a few days tting in motion one of the most devastating
periods in the history of the United States.
Black Thursday
The most significant events started on Black Thursday, October 24, 1929. On that day, nearly 13 million
shares of stock were traded. It was a record number of stock trades for the U.S. and marked the end of
an upward trend on stock prices. On Black Thursday, the stock prices dropped so quickly, the stock
ticker could not keep up. As the day progresd, the stock ticker lagged behind, failing to show the most
up to date stock prices.
Top American Bankers Try to Save the Banking System
On the next day, Friday, October 25, veral of the nation’s largest bankers met to decide what they
could do about the situation. Among the attendees were the heads of Morgan Bank, Cha National
Bank, and National City Bank. The bankers ultimately decided to purcha a number of U.S. Steel
shares above market price. A similar tactic worked to end a previous stock market scare in 1907 when
the New York Stock Exchange plummeted, causing many banks and business to file bankruptcy.
American banker J.P. Morgan and a few other bankers bailed out the banking system using their own
money. The bankers who tried to thwart the 1929 stock market crash were unsuccessful. There were
positive results, but they were short lived.
In tho days, the stock market traded six days a week instead of five. The bankers’ move led to a slight
increa in stock price on Saturday, October 26. But over the weekend many investors lost faith in the
stocks and decided to ll their shares. When the markets reopened on Monday, October 28, 1929,
another record number of stocks were traded and the stock market declined more than 22%. The
situation worned yet again on the infamous Black Tuesday, October 29, 1929 when more than 16
million stocks were traded. The stock market ultimately lost $14 billion that day.
What Caud the 1929 Stock Market Crash?
In the years leading up to the stock market crash of 1929, the stock market
had gained much popularity as a way of making money. Becau stocks
prices had been on the ri, they gained the reputation of being a safe way
to invest. Many investors believed stocks were their ticket to riches.
A great number of investors were purchasing stock on the margin, meaning
they put 10% of the investment and borrow the remaining 90%. For example,
if $10 worth of stock was purchad, the investor put in $1, while the
mortgage broker put in the other $9. It was a good deal as long as stocks
were gaining value. However, if the stock lost value, the stockbroker would
issue a margin call requiring the investor to pay back the loan. In the
example above, not only did the investor lo the $1 he invested, he also
had to pay back the $9 he’d borrowed.
How Mass Trades Lowered Stock Prices
All was well for most of the 1920s. People believed that stock values would
never stop rising. But, in 1929, some of the larger investors realized the
stock prices were artificially high as a result of the mass investments from
speculative investors. So, tho “savvy” investors started trading their stocks
and conquently, stock prices began to fall. Then, brokers issued margin
calls leading to further stock market drops. The situation peaked on Black
Tuesday when the stock market completely crashed.
Even after Black Tuesday, stock prices continued to fall until November 23,
1929 when there was a brief period of stabilization. Though it emed like
the worst had been en, there was more decline to come. After that, the
stock market continued to decline until it reached its lowest point on July 8,
1932.
The Stock Market Crash’s Effect on the U.S. Economy
The stock market crash devastated the American economy becau not only had individual investors put
their money into stocks, so did business. When the stock market crashed, business lost their
