The New York Stock Exchange crashed on what came to be known as “Black Tuesday,” which signaled the beginning of the ten-year Great Depression in 1929 that affected all Western industrialized countries.
The Roaring Twenties, the decade that followed World War I and led to the Crash, was a time of wealth and excess. Building on post-war optimism, rural Americans migrated to the cities in vast numbers in hopes of finding a more prosperous life in the expansion of America’s industrial sector. While the American cities prospered, overproduction of agriculture produce created widespread financial despair among American farmers throughout the decade. These are key factors that led to the 1929 stock market crash.
Despite the dangers of speculation, many believed that the stock market would continue to rise forever. On March 25, 1929, after the Federal Reserve warned of excessive speculation, a mini-crash occurred as investors started to sell stocks at a rapid pace, exposing the market’s shaky foundation. Stop-gap measures were taken to halt the slide, but the American economy showed ominous signs of trouble: steel production declined, construction was sluggish, automobile sales went down, and consumers were building up high debts because of easy credit (sound familiar?)
The stock market had been on a nine-year run that saw the Dow Jones Industrial Average increase in value tenfold, peaking at 381.17 on September 3, 1929. Optimism and financial gains of the great bull market were shaken after a well-publicized early September prediction from a financial expert that “a crash was coming.” This was the beginning of the crash.
On September 20th, the London Stock Exchange crashed when top British investors were jailed for fraud and forgery. The London crash weakened the optimism of the American investment in overseas markets. Selling intensified through mid-October. On October 24th (“Black Thursday”), the market lost 11 percent of its value at the opening bell on heavy trading. The huge volume meant that the report of prices on the ticker tape in brokerage offices around the nation was hours late, so investors had no idea what most stocks were actually trading for at that moment, increasing panic.
Again, attempts were made to halt the slide, tactics similar to the one that ended the Panic of 1907. The Dow Jones recovered and closed only a little over six points down for the day. The rally continued on Friday, but the respite was only temporary.
Over the weekend, events were covered by the newspapers across the United States. On October 28, “Black Monday,” more investors facing margin calls decided to get out of the market, and the slide continued with a record loss in the Dow of 13%. The next day, “Black Tuesday,” October 29, 1929, panic selling reached its crescendo. The Dow lost an additional 12%. The volume of stocks traded that day was a record that was not broken for nearly 40 years. The market had lost over $30 billion in the space of two days; $14 billion was lost on October 29th alone.
More stop-gap measures managed to help the market recover for several months. But the following year, the Dow embarked on another, much longer and steady slide from April 1931 to July 8, 1932 when it closed at 41.22—its lowest level of the 20th Century, which translated to a 89% loss rate for all of the market’s stocks. The market would not return to the peak closing of September 3, 1929 until November 23, 1954.
(me and Wikipedia)