What was The Stock Market Crash Of 1929?

The Stock Market crash of 1929 or The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market wreck that occurred in the autumn of 1929. Many a time we all may have heard of this but let us dive in deep to know in detail.

Black Days

This crash is recognized as the worst economic event in world history — commenced on Thursday, October 24, 1929, with nervous investors trading a record 12.9 million shares.

On October 28, known as “Black Monday,” the Dow Jones Industrial Average plunged nearly 13 percent. The market fell another 12 percent the next day, “Black Tuesday” While the crisis send shock waves across the financial world, there were numerous signs that a stock market crash was coming.

On October 29, 1929, Black Tuesday cracked Wall Street as investors traded some 16 million shares on the New York Stock Exchange in a single day. Billions of dollars were lost, washing out thousands of investors. In the consequence of Black Tuesday, America and the remainder of the industrialized world spiraled earthward into the Great Depression (1929–39), the darkest and longest-lasting economic downfall in the history of the Westbound industrialized world up to that time.

What were the Roaring twenties?

The roaring period roared the highest. It was a golden time where the prices were at their highest.

Throughout the mid-to-late 1920s, the capital market in the United States experienced accelerated development. It endured for the first six months following President Herbert Hoover’s inauguration in January 1929.

The costs of stocks rose to fantastic pitches in the exceptional“Hoover bull market,” and the public, from banking and industrial tycoons to drivers and culinarians, hurried to brokers to fund their liquid assets or their gains in securities, which they could trade at an advantage. Billions of dollars were pulled from the banks into Wall Street for brokers’ loans to hold margin accounts.

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The Dow rose six-fold from August 1921 to September 1929, causing economists like Irving Fisher to settle, “Stock prices have reached what seems like a permanently high plateau.” The market authoritatively topped on September 3, 1929, when the Dow shot up to 381.

By this period, several common working-class citizens had become fascinated in stock investments, and some acquired stocks “on margin,” suggesting they spent only a small percentage of the value and borrowed the remainder from a bank or broker.

To add to it, the overall business climate in the United States was wholesome in the 1920s. Unemployment was lower, and the automobile industry was booming.

What caused it?

There are many theories raised for this cause. But what was exactly the reason behind this remains a mystery. Several kinds of stories were discussed to explain the cause that might have made this crash inevitable.

Overpriced stocks

Some experts debate that at the time of the downfall, stocks were seriously overpriced which a collapse was evident.

That usual sense of fearless overconfidence imbibed to average consumers and small investors, managing to an “asset bubble.” The crash 5after a long period of rising market growth that led to consumer overconfidence.

In fact, after 1922, the stock exchange had risen by nearly 20 percent annually until 1929.

Access to easy credit

During the 1920s, there was a fast growth in bank credit and easily achieved loans. People supported by the market’s stable nature were fearless of debt.

A very closer kind of overconfidence was observed in industries such as manufacturing and agriculture: over and excessive production caused a glut of things including farm cultivated crops, steel, long-lasting goods, and iron.

Raised interest rates

In August 1929 — some weeks prior to the stock market collapse– the Federal Reserve Bank of New York raised the interest points from 5 percent to 6 percent.

Some experts claim this deep, sudden raise cooled investor enthusiasm, which caused market stability and strongly reduced economic development.

Panic among people

The day before Black Thursday, the Washington Post ran the headline: “Huge Selling Wave Creates Near-Panic as Stocks Collapse,” while The NY Times announced: “Prices of Stocks Crash in Heavy Liquidation.” Pointless to mention, such headlines can create panic in anyone!

Public panic in the days following the share market collision started to hordes of people hurrying to banks to dissolve their capitals in several “bank runs.” And investors were powerless to remove their money because bank officials had invested the money in the market. SO, it created a huge issue there.

This started to cause heavy bank crashes and increased an already terrible financial condition. Many analysts insist that the financial press also performed a big role in providing to the sense of panic that exacerbated the stock exchange crash.

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Agriculture health

Another important considered reason is -an ongoing agricultural recession. Farmers had trouble making an annual profit to keep their businesses alive. It became difficult for many to keep up with a good sum of profit. Some believe this agricultural degradation caused the financial climate of the country to shake up this bad.

Great Depression

The Great Depression was one of the deadliest economic downturns in the history of the world, lasting from 1929 to 1939. It started to post the stock market collapse of October 1929.

This pushed Wall Street into a panic and cleared out millions of businessmen. Over the next certain years, customer spending and investment decreased, leading to a deep decrease in industrial profits. And it also caused a decline in employment as failing companies laid-off workers.

In 1933, when the Great Depression was at its bottommost point, some 15 million Americans lost their jobs and roughly half the country’s banks had collapsed.

Hope that this article was of some use for those who wanted to know about the market crash of 1929. There are many online stock trading courses for beginners, to learn more about it. If you have any further queries then do ask us about the same. Your suggestions mean the world to us! Also, let us know if you want to read about anything else.