Stock Market Crash Of 1929

The Great Crash

In 1927, the economy had a recession but government & business leaders ignored warning signs. The Federal Reserve lowered interest rates for loans to stimulate the economy, but this easy credit led speculators to buy stock "on-the-margin" Buying on margin could be very risky." Many people hoping to make a lot of money on the stock market bought stocks on margin.

An initial stock market on Oct 24, 1929 (Black Thursday) led to a catastrophic drop in stocks on Oct 29. Investors sold stocks, causing stock prices to fall. Banks lent less money, factories produced less, workers were fired or paid less, consumers had less money to spend and factories & businesses closed. This big chain reaction lasted all the way till 1954.

The U.S. stock market had only about 3 million active buyers & sellers but the spillover into the greater economy led to the Great Depression. Unemployment lasted from 1929 till 1942. In 1929, the total market debt of the USA was 210% of the value of GDP. By 1934, U.S. debt rose to 265% of GDP. In 2005, the value of U.S. debt was 303% of GDP.

Reasons For The Stock Market Crash

  • Stocks were overpriced due to speculation
  • Massive fraud and illegal activity
  • Margin buying
  • Federal Reserve Policy
1929 The Great Crash. - a video about the stock market crash in 1929