Wall Street Crash of 1929

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The Wall Street crash of 1929, also known as the Great Crash or Crash of '29, was a major stock market crash in the United States in late 1929. It began in late October with a sharp decline in share prices on the New York Stock Exchange (NYSE) and ended in mid-November. The crash began a rapid erosion of confidence in the U.S. banking system and marked the beginning of the worldwide Great Depression, which lasted until 1939. The Wall Street crash was the most devastating in the history of the United States when taking into consideration the extent and duration of its aftereffects.^[1] The Wall Street crash is most associated with October 24, 1929, called "Black Thursday", when 12.9 million shares were traded on the stock exchange in a single day (compared to an average of 4 million),^[2][3] and October 29, 1929, "Black Tuesday", when some 16.4 million shares were traded.^[4]

The "Roaring Twenties" of the previous decade had been a time of industrial expansion in the U.S., and much of the profit had been invested in speculation, including in stocks. Many members of the public, disappointed by the low interest rates offered on their bank deposits, committed their relatively small sums to stockbrokers. By 1929, the U.S. economy was showing signs of trouble; the agricultural sector was depressed due to overproduction and falling prices, forcing many farmers into debt, and consumer goods manufacturers also had unsellable output due to low wages and therefore low buying power. Factory owners cut production and fired staff, reducing demand even further. Despite these trends, investors continued to buy shares in areas of the economy where output was declining and unemployment was increasing, so the purchase price of stocks greatly exceeded their real value.

By September 1929, more experienced shareholders realized that prices could not continue to rise and began to get rid of their holdings, which caused share values to stall and then fall, encouraging more to sell. As investors panicked, the selling became frenzied. After Black Thursday, leading bankers joined forces to purchase stock at prices above market value, a strategy used during the Panic of 1907. This encouraged a brief recovery before Black Tuesday the following week. Further action failed to halt the fall, which continued until July 8, 1932; by then, the stock market had lost some 90% of its pre-crash value. The United States Congress responded to the events by passing the Banking Act of 1933, also known as the Glass–Steagall Act, which separated commercial and investment banking. Worldwide, stock exchanges introduced a practice of suspending trading when prices fell rapidly to limit panic selling. Scholars differ over the effect of the crash on the Great Depression, with some claiming that the price fluctuations were insufficient on their own to trigger a major collapse of the financial system, with others arguing that the ups and downs—and the other business problems that affected the U.S. at the end of the "Roaring Twenties"—should be jointly interpreted as a stage in the series of business cycles which affect all capitalist economies.