The Stock Market Crash of 1929.

By: Thomas Hunter

The Stock Market Crash of 1929 and the following Great Depression have become not only a lesson in the potential volatile stock market, but also a yardstick by which all following dips in the market have been compared.  The economy will not always be safe, and that lesson was learned by the entire nation during October of 1929.   

To understand the reason for the crash, one must analyze the market leading up to 1929.  The post World War I era brought with it a period of rebuilding and growth in the United States.  The burgeoning use of electricity brought a demand for electric appliances and homes were being retrofitted to use electricity.  The consumerism of the 1920s contributed to the boom, and from 1925 to 1929 there was a growing interest in “playing the market.”   

One of the important features of trading stocks during the 1920s was the ability for investors to buy shares on margin.  Instead of purchasing stocks outright, investors could put down a partial cash payment with the remainder of the share on credit.  The collateral for the credit was ownership of the stock.  This made for a very shaky market, and the use of purchase on credit helped push up the price of many stocks.  The investors were essentially paying off what they owned on the stock by helping contribute to its increase in value. 

Economists at the time were well aware that this practice was risky and had the potential to be very dangerous for those investing and the market as whole.  However, the policy of the Coolidge administration and many other world governments was to have a laissez-faire approach to the economy.  Laissez-faire roughly translated means “let things be” and is characterized by a government policy on non-intervention.  This approach allowed the speculation market to grow unchecked.   

By 1928, there was a lot of discussion in the government and the stock market about how to slow these marginal stock purchases without throwing up any red flags for investors.  However, those in power continued to hope for the best and let the market develop untouched. 

By March 1929, after Herbert Hoover was inaugurated, the Federal Reserve Board was meeting daily behind closed doors to discuss the market and U.S. economy.  There was a “mini-crash” on March 25th that year that made the country and experts a bit nervous.   

There seemed to be a bit of a rebound in the summer of 1929.  The market continued throughout the summer months very stable.  On September 3rd, it became apparent that the stock market had changed from a bull market (overall rising prices) to a bear market (overall falling prices).  The slowing of the market caused panic throughout the country’s investors.  This fear was contagious and came to a fateful breaking point for one week in October.   

On Thursday, October 24, 1929 approximately 12 million shares were traded on the NYSE. This was three times the amount of shares traded than the previous record period during March of 1928. 

The market seemed to rebound the next day and in a short trading session on Saturday. On Monday, however, the volume of shares was back up to roughly 9 million.  Over the weekend, many panicked investors decided that the market was too volatile and wanted to pull out the first chance that they got.   

The following day, Black Tuesday, was the most infamous day in Wall Street History.  In order to get out of the market, hundreds of thousands called their brokers and told them to sell stock at market value.  Since a majority of these stocks had been bought on credit, and were now way below their original value, the investors were now liable for the remainder of the stocks’ original value.  The dumping of stocks created a snowball effect and as the market began to spiral out of control.   

The market bottomed out and by the end of Tuesday, October 29th the market had suffered a loss of 12 percent, which equaled $100 billion in assets.  Between September and October of 1929, the stock market lost almost 40 percent of its value.  It continued to fall in value until mid 1932, and did not fully recover for another 22 years.     


Wake Up Richer Every Morning... Instant Internet Business Makes Money Automatically... Thomas Hunter is an Internet marketer, author and publisher and has helped hundreds of people become successful Niche Marketers. Explore the highly profitable world of Niche Marketing at http://SixFigureNiches.com our popular website.
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