Stock Market Crash of 1929
What it is:
How it works (Example):
The years preceding the irrational exuberance. prices had risen across the board, even for companies that posted little profit, and investors were very optimistic that the general upward trend of the and the economy would continue for some time.crash of 1929 were filled with
The Dow Jones Industrial Average nearly doubled, rising from 191 in early 1928 to 381 by September 3, 1929. Prices began falling slightly but steadily, however, as investors began to take profits. Many economists were not sure what to make of the slide, and Irving Fisher, a well-known economist at the time, dismissed it as nothing serious.
Then on October 10, 1929, the Dow Jones Industrial Average closed above 350 for the first time in 10 trading days. This respite sparked profit taking, and the Dow Jones Industrial Average began falling again amid the selling. The selling became intense on Monday, October 23, and the fell 6.3%. By October 24, Black Thursday, the selling frenzy reached a and turned to flat-out panic. The trading got so high that it delayed the ticker tape by over an hour, which created confusion and anxiety. Some exchanges were so overwhelmed that they closed early. The Dow Jones Industrial Average closed at 299.27 that day. The Dow Jones Industrial Average closed at 230.07 that day.
The rally that started when Richard Whitey, then head of the New York Exchange, calmly began buying of U.S. Steel and other companies. His confidence encouraged others to begin buying. This did little more than temporarily stem the tide, however, because from to October 29, 1929 (Black Tuesday), still lost more than $26 billion of value and more than 30 million traded. After this dismal week, prices continued to fall, wiping out an estimated $30 billion in values by mid-November 1929.crash of 1929 is often associated with stories of investors and traders jumping out of windows after losing everything. However, not all was lost: a
The days surrounding the bull market, were ruined financially. They had to sell everything to pay back their debts, and many couldn't pay them back at all. Thousands of banks failed as a result; businesses closed, unable to get credit; and the nation's disposable income fell precipitously.crash of 1929 were especially painful for investors who had borrowed to purchase that had become worthless or close to it. The situation influenced what became a major turning point for the American economy because many of these borrowers, who had leveraged themselves considerably in an effort to participate in the
Why it Matters:
Historians often cite thecrash of 1929 as the beginning of the Great because it marked not only the end of one of the nation's greatest but also the end of widespread optimism and confidence in the U.S. .
As with many s instability. Others ' the huge amount of investors had used to buy , and some cite the scandal-ridden recall of British invested in the United States and the September 26 spike in the Bank of England's discount rate. Regardless, investors no longer regarded high and dividends, high wages, readily available bank debt, a booming auto industry and a relative lack of regulation solely as signs of better days ahead. They began to see them as signs of ready for reversal.reversals, the causes are numerous, intertwined, and controversial. For example, many cite the September 1929 passage of the Smoot-Hawley Act, which placed high on many imported items, as a major contributor to the
Besides the dramatic effect on investor psychology, the Federal Depository Insurance and the passage of the Securities Act of 1933, the Glass-Steagall Act of 1933, the Securities Exchange Act of 1934 and the Public Utility Holding Act of 1935. The panic caused by information delays also spawned faster ticker systems that could handle heavy trading days.crash of 1929 contributed to the creation of a variety of new laws, organizations and programs designed to improve the country's infrastructure, further social welfare and prevent corporate fraud and abuses. These included the establishment of the