06-16-2016

The Wall Street 1929 Crash

The Wall Street 1929 crash followed a carefree decade identified as the roaring twenties. In the twenties, many people were investing in the stock market after learning of the possibility of accumulating wealth from such investments. Western industrialized nations experienced, not only immediate financial losses, but a twelve-year long economic depression that did not improve until the beginning of World War II. The time period was one of innovation, invention, and abundance. No one anticipated what was to come and what would eventually become known as the Wall Street Crash occurring in the late 1920s.

About the History of Wall Street and the Crash of 1929

The twenties was a time period where business people and bankers were accumulating mass wealth, and many people, after investing in the stock market, established small fortunes. As people saw the benefits of investing, Wall Street became synonymous with wealth and risk. Millions of people, both women and men, began investing in stocks. The price of stocks was on the rise, so the crash in the late 1920s was a financially devastating surprise for many. Following the October crash of the stock market, western industrialized nations experienced, not only immediate financial losses, but a twelve-year long economic depression that did not improve until the beginning of World War II.

All seemed well just two weeks prior to the crash of the stock market. People were still interested in investing their life savings in order to make big bucks through stock investments. There were even people borrowing funds so that they could buy more stock shares. By the late summer of 1929, there were many brokers that were lending two thirds of a small investor's stock face value to the small investor. At that time, over eight billion dollars was loaned out; the latter amount of funds equaled more than all of the U.S. currency in circulation in August of 1929. Increases in stock share prices caused more and more people to borrow to invest.

A Brief Timeline of the Wall Street 1929 Crash

An economic bubble was created as speculation generated more price increases. Due to the practice of margin buying, in the event that the stock market suddenly took a downturn, all investors stood a remarkable chance for losing a significant amount of cash. In September of that year the S&P composite stocks P/E ratio equaled a little more than 32.5, which was far above the norm. The Dow had peaked in September 1929 at 281.17, and a downturn was soon to follow. A sharp downturn occurred followed by a quick rise in stock prices that September. Another sharp drop followed.

On October 24th of that year, also known as Black Thursday, the stock market made the downturn that stirred a panic in many. The day prior, the Dow had dipped 6.3 percent and the session for October 24th did not look promising. By the following Tuesday, just four days later, there was over 25 billion dollars that investors had lost. The lost funds equaled more than eight times the Federal Government's yearly budget. From October 22, 1929 to October 29, 1929, there was a drop of 30 percent in the Dow Jones Industrial Average.

It is believed that one to twenty-five million people were actively investing in the stock market before the crash occurred. Since you could take advantage of margin buy ins and you did not require a lot of cash to get involved in stock market investing, many people were taking advantage of investment opportunities. People were borrowing cash to invest with interest rates on loans as low as 3.5 percent. The stocks that were purchased with the monies borrowed were then used as loan collateral.

More About the History of Wall Street 1929 Crash

By September of 1929, the stock market was beginning to illustrate some serious instability. The sharp drop, rise, and drop in prices of stocks should have been an indicator that something was greatly amiss. People had faith in the stock market however, since the market had declined somewhat before and always recovered. Investors became very nervous and began selling off shares rapidly. By October 21st of that year, a lot of selling occurred as people tried to save themselves from the potential loss they saw coming. On Black Thursday, so many people were selling their stock shares that the Exchange on Wall Street could not keep pace with all of the rapid selling transactions.

Some bankers and financially wealthy investors, in an effort to promote confidence in the market, began buying up all of the stocks that were being sold. This was only a temporary and transient fix however. Over the weekend following Black Thursday people witnessed a diminishment in the number of stocks being sold off, but by the following Monday, the panic was refreshed. Black Tuesday followed. The Exchange floor and the people in it became almost animalistic, screaming, yelling, and fighting. Some reports say that a few people were even passing out as stock prices tumbled.

A twelve-year long decline followed the loss of billions of dollars that October. Any person that had invested in the stock market lost their money and it took most of their life to break even. It is believed by some that the 1929 crash was part of the reason for the Great Depression which is identified as the biggest financial crisis in the entire twentieth century. The Wall Street Crash had a severe impact on many world nations. Following the crash in 1929, there were twelve million people that were unemployed and another twelve thousand that were losing their jobs on a daily basis. More than 1600 banks went out of business and filed for bankruptcy, and twenty thousand companies also had to file for bankruptcy. That year alone, 23,000 people who were devastated by the financial destruction committed suicide.

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