The Wall Street Crash of 1929 , also known as the Great Crash or the Stock Market Crash of 1929 , was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and duration of its fallout.
Timeline
The Roaring Twenties, the decade that led up to the Crash, was a time of wealth and excess, and despite caution of the dangers of speculation, many believed that the market could sustain high price levels. Shortly before the crash, economist Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau." The optimism and financial gains of the great bull market were shattered on Black Tuesday, when share prices on the NYSE collapsed. Stock prices fell on that day and they continued to fall, at an unprecedented rate, for a full month.
The October 1929 crash came during a period of declining real estate values in the United States (which peaked in 1925) near the beginning of a chain of events that led to the Great Depression, a period of economic decline in the industrialized nations.
In the days leading up to "Black Thursday" (called "Black Friday" in Europe due to time difference), the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot-Hawley Tariff Act, which was then being debated in Congress. After the crash, the Dow Jones Industrial Average (DJIA) partially recovered in November-December 1929 and early 1930, only to reverse and crash again, reaching a low point of the great bear market in 1932. On July 8, 1932 the Dow reached its lowest level of the 20th century and did not return to pre-1929 levels until 23 November 1954.
After a six-year run when the world saw the Dow Jones Industrial Average increase in value fivefold, prices peaked at 381.17 on September 3, 1929. The market then fell sharply for a month, losing 17% of its value on the initial leg down.
Prices then recovered more than half of the losses over the next week, only to turn back down immediately afterwards. The decline then accelerated into the so-called "Black Thursday", October 24, 1929. A then-record number of 12.9 million shares were traded on that day.
At 1 p.m. on the same day (October 24), several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor. The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to a tactic that ended the Panic of 1907, and succeeded in halting the slide that day. In this case, however, the respite was only temporary.
Over the weekend, the events were covered by the newspapers across the United States. On Monday, October 28, the first "Black Monday", more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 13%. The next day, "Black Tuesday", October 29, 1929, about 16 million shares were traded. The volume on stocks traded on October 29, 1929 was "...a record that was not broken for nearly 40 years, in 1968." Author Richard M. Salsman wrote that on October 29—amid rumors that U.S. President Herbert Hoover would not veto the pending Hawley-Smoot Tariff bill—stock prices crashed even further." William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide. The DJIA lost another 12% that day. The ticker did not stop running until about 7:45 that evening. The market lost $14 billion in value that day, bringing the loss for the week to $30 billion.
An interim bottom occurred on November 13 with the Dow closing at 198.60 that day. The market recovered for several months from that point, with the Dow reaching a secondary closing peak (i.e., bear market rally) of 294.07 on April 17, 1930. The market embarked on a steady slide in April 1931 that did not end until 1932 when the Dow closed at 41.22 on July 8, concluding a shattering 89% decline from the peak. This was the lowest the stock market had been since the 19th century.
Economic fundamentals
The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market, a significant number even borrowing money to buy more stocks. By August 1929, brokers were routinely lending small investors more than ⅔ of the face value of the stocks they were buying. Over $8.5 billion was out on loan, more than the entire amount of currency circulating in the U.S. at the time.The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929, clearly above historical norms. Most economists view this event as the most dramatic in modern economic history.
On October 24, 1929 (with the Dow just past its September 3 peak of 381.17), the market finally turned down, and panic selling started. In 1931, the Pecora Commission was established by the U.S. Senate to study the causes of the crash. The U.S. Congress passed the Glass-Steagall Act in 1933, which mandated a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.
After the experience of the 1929 crash, stock markets around the world instituted measures to temporarily suspend trading in the event of rapid declines, claiming that they would prevent such panic sales. The one-day crash of Black Monday, October 19, 1987, however, was even more severe than the crash of 1929, when the Dow Jones Industrial Average fell a full 22.6%. (The markets quickly recovered, posting the largest one-day increase since 1933 only two days later.)
Effects and academic debate
Together, the 1929 stock market crash and the Great Depression "...was the biggest financial crisis of the 20th century." "The panic of October 1929 has come to serve as a symbol of the economic contraction that gripped the world during the next decade." "The crash of 1929 caused 'fear mixed with a vertiginous disorientation', but 'shock was quickly cauterized with denial, both official and mass-delusional'." "The falls in share prices on October 24 and 29, 1929 ... were practically instantaneous in all financial markets, except Japan." The Wall Street Crash had a major impact on the U.S. and world economy, and it has been the source of intense academic debate—historical, economic and political—from its aftermath until the present day. "Some people believed that abuses by utility holding companies contributed to the Wall Street Crash of 1929 and the Depression that followed." "Many people blamed the crash on commercial banks that were too eager to put deposits at risk on the stock market."
"The 1929 crash brought the Roaring Twenties shuddering to a halt." As "tentatively expressed" by "economic historian Charles Kindleberger", in 1929 there was no "...lender of last resort effectively present", which, if it had existed and were "properly exercised", would have been "key in shortening the business slowdown that normally follows financial crises." The crash marked the beginning of widespread and long-lasting consequences for the United States. The main question is: Did the "'29 Crash spark The Depression?", or did it merely coincide with the bursting of a credit-inspired economic bubble? The decline in stock prices caused bankruptcies and severe macroeconomic difficulties including business closures, firing of workers and other economic repression measures. The resultant rise of mass unemployment and the depression is seen as a direct result of the crash, though it is by no means the sole event that contributed to the depression; it is usually seen as having the greatest impact on the events that followed. Therefore the Wall Street Crash is widely regarded as signaling the downward economic slide that initiated the Great Depression.
True or not, the consequences were dire for almost everybody. "Most academic experts agree on one aspect of the crash: It wiped out billions of dollars of wealth in one day, and this immediately depressed consumer buying." The failure set off a worldwide run on US gold deposits ( i.e. , the dollar), and forced the Federal Reserve to raise interest rates into the slump. Some 4,000 lenders were ultimately driven to the wall. Also, the uptick rule, which "...allowed short selling only
Wall Street Crash of 1929 - Wikipedia, the free encyclopedia
The Wall Street Crash of 1929, [1] [2] also known as the Great Crash or the Stock Market Crash of 1929, was the most devastating stock market crash in the history of the United ...
Stock market crash - Wikipedia, the free encyclopedia
A stock market crash is a sudden dramatic decline of stock prices across a significant ... Great Depression; Market trends; Meltdown Monday; Modeling and analysis of financial markets
The First Measured Century: Timeline: Events - Stock Market Crash
Stock Market Crash. 1929 - The stock market crash ushered in the Great Depression. What made the stock market crash? Here's a brief summary.
H102 Lecture 18: The Crash and the Great Depression
Since most Americans viewed the stock market as the chief indicator of the health of the American economy, the Great Crash shattered public confidence.
YouTube - Stock Market Crash & The (next) Great Depression Ahead ...
Update: April 7 2008: Since producing this video, I've been introduced to and following another investment expert whom I'd like you to know about.
Headlines Of The Great Stock Market Crash Of 1929
Our Advertisers Represent Some Of The Most Unique Products & Services On Earth! Headlines Of The Great Stock Market Crash Of 1929 From PBS 1-13-8
Stefanie McAlpin
Stefanie McAlpin . Ali Bragg. Mark Klein . Millard Public Schools. 9 th Grade American History “The Great Stock Market Crash” Learning Objective: 1.
Great Depression
Glossary definition of Great Depression ... Stock Market Crash! Net is the authority on the market crash phenomenon.
stock market crash Definition
Black Tuesday - More. Great Depression - More. Black Thursday - More ... Search volume for stock market crash
Looking Back At the Crash Of 29