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
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
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
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
At 1 p.m. on the same day (October 24), several leading Wall Street
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
, head of the Chase
; and Charles
, president of
the National City Bank of New York
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.
at a price well above the current
market. As traders watched, Whitney then placed similar bids on
other "blue chip
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
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
prices crashed even further." William
joined with members
of the Rockefeller family
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
Dow Jones Industrial Average for 10/28/1929 and 10/29/1929
|October 28, 1929
|October 29, 1929
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.
Speculation in the 1920s caused many people to buy stocks with
loaned money and they used these stocks as collateral for buying
more stocks. Broker's loans went from under $500 million in mid
1928 to $850 million in September of 1929. The stock market boom
was very unsteady, because it was based on borrowed money and false
optimism. When investors lost confidence, the stock market
collapsed, taking them along with it.
Short signs government economic policies were one of the factors
that led to the Great Depression. Politicians believed that
business was the key business of America. Thus, the government took
no action against unwise investing. Congress passed high tariffs
that protected American industries but hurt farmers and
The economy was not stable. National wealth was not spread evenly.
Instead, most money was in the hands of a few families who saved or
invested rather than spent their money on American goods. Thus,
supply was greater than demand. Some people profited, but others
did not. Prices went up and Americans could not afford anything.
Farmers and workers did not profit. Unevenness of prosperity made
recovery difficult.Stock Market crash of 1929In the years between
1925 and 1929, the prices of stock on the New York Stock Exchange
flourished, more than doubling their values. This soaring stock
prices caused thousands to start speculating or trying to buy large
amounts of stock in order to make a large profit. The large amounts
of money thrown into the stock market would end up causing "The
Great Depression" in the United States.
, 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
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
established by the U.S.
to study the causes of
the crash. The U.S. Congress passed the Glass-Steagall Act
in 1933, which
mandated a separation between commercial
, which take deposits and extend loans
, and investment
, which underwrite
, issue, and
, 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
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
"The 1929 crash brought the Roaring
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[s] 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?",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
, 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 when the last tick in a stock’s price was positive," "...was
implemented after the 1929 market crash to prevent short sellers
from driving the price of a stock down in a bear run."
Economists and historians disagree as to what role the crash played
in subsequent economic, social, and political events. The Economist
argued in a 1998 article,
"Briefly, the Depression did not start with the stockmarket crash."
Nor was it clear at the time of the crash that a depression was
starting. On November 23, 1929, The Economist
a very serious Stock Exchange collapse produce a serious setback to
industry when industrial production is for the most part in a
healthy and balanced condition? ... Experts are agreed that there
must be some setback, but there is not yet sufficient evidence to
prove that it will be long or that it need go to the length of
producing a general industrial depression." But The
cautioned: "Some bank failures, no doubt, are also
to be expected. In the circumstances will the banks have any margin
left for financing commercial and industrial enterprises or will
they not? The position of the banks is without doubt the key to the
situation, and what this is going to be cannot be properly assessed
until the dust has cleared away."
Many academics see the Wall Street Crash of 1929 as part of a
historical process that was a part of the new theories of boom and bust
. According to economists such as
and Nikolai Kondratieff
the crash was merely
a historical event in the continuing process known as economic cycles
. The impact of the crash was
merely to increase the speed at which the cycle proceeded to its
's A Monetary History of
the United States
, co-written with Anna Schwartz
, makes the argument that what
made the "great contraction" so severe was not the downturn in the
business cycle, trade protectionism, or the 1929 stock market
crash. But instead what plunged the country into a deep depression,
was the collapse of the banking system during three waves of panics
over the 1930-33 period.
- In the 1961 film Splendor
in the Grass, Bud's father commits suicide after losing
his fortune in the Crash.
- In the 1997 film Titanic, older Rose says that in
response to this event, Cal Hockley put a gun in his mouth and
- Pyramid structures brought down by Wall Street
Crash The Times
- Role of 'new Tinkerman' tailor-made for Benítez
- America gets depressed by thoughts of 1929
revisited The Sunday Times
Wanniski The Way the World Works ISBN 0895263440, 1978
- DJIA 1929 to Present (Yahoo! Finance)
- "U.S. Industrial Stocks Pass 1929 Peak", The Times, 24
November 1954, p. 12.
- The Great Depression, by Robert Goldston, pages
- The Panic of 2008? What Do We Name the Crisis?
The Wall Street Journal
Richard M. "The Cause and Consequences of the Great Depression,
Part 1: What Made the Roaring '20s Roar" in The Intellectual
Activist, ISSN 0730-2355, June, 2004, p. 16. Emphasis
- pbs.org – New York: A Documentary
- Liquid Markets.
- Paulson affirms Bush assessment The
- Downtown bestiary Times Online
- Crashes, Bangs & Wallops Financial
- Death of the Brokerage: The Future of Wall
Street National Public Radio
- Kaboom!...and bust. The crash of 2008 The
- The Market Turmoil: Past lessons, present advice;
Did '29 Crash Spark The Depression? The New York
- Practice has plenty of historical precedents -
- Funds want ‘uptick’ rule back Financial
- Economics focus: The Great Depression The
- Reactions of the Wall Street slump The
- Panic control The Washington
- Bierman, Harold. "The 1929 Stock Market Crash". EH.Net
Encyclopedia, edited by Robert Whaples. August 11, 2004. URL
- Brooks, John. (1969). Once in Golconda: A True Drama of
Wall Street 1920-1938. New York: Harper & Row. ISBN
- Galbraith, John Kenneth. (1954). The Great Crash:
1929. Boston: Houghton Mifflin. ISBN 0-395-85999-9.
- Klein, Maury. (2001). Rainbow's End: The Crash of
1929. New York: Oxford University Press. ISBN
- Klingaman, William K. (1989). 1929: The Year of the Great
Crash. New York: Harper & Row. ISBN 0-060-16081-0.
- Rothbard, Murray N. "America's Great Depression"
- Salsman, Richard M. “The Cause and Consequences of the Great
Depression” in The Intellectual Activist, .
- * “Part 1: What Made the Roaring ’20s Roar”, June, 2004, pp.
- * “Part 2: Hoover’s Progressive Assault on Business”, July,
2004, pp. 10–20.
- * “Part 3: Roosevelt's Raw Deal”, August, 2004, pp. 9–20.
- * “Part 4: Freedom and Prosperity”, January, 2005, pp.
- Shachtman, Tom. (1979). The Day America Crashed. New
York: G.P. Putnam. ISBN 0-399-11613-3.
- Thomas, Gordon, and Max Morgan-Witts. (1979). The Day the
Bubble Burst: A Social History of the Wall Street Crash of
1929. Garden City, NY: Doubleday. ISBN 0-385-14370-2.