A Look Back in History: The Stock Market Crash of 1929

America was enjoying the Roaring Twenties and all seemed right with the world. Then October 29, 1929 hit Wall Street – better known as Black Tuesday. This will forever go down in history as one of the worst days investors have ever witnessed.

Throughout the 1920s, it seemed stocks could do no wrong – rising and rising until hitting a peak in August of 1929. With production in decline and unemployment rising sharply, stocks were at levels that exceeded their true value. Other factors contributed to the precarious positioning of the market, eventually signaling collapse, such as low wages, higher amounts of debt, a struggling agricultural sector and too many large bank loans that couldn’t be liquidated, according to History.com.

Right before the market plummeted, people believed in the stock market, believed that it would continue to go up. Heck, even banks were betting share prices would go up. When hundreds of banks lost those bets, customers got wind of this and started taking their money out. This was called a bank run, which happens in times of mass panic. Because everyone wanted their money out at once, the banks couldn’t accommodate this and therefore collapsed.

Stock prices started the downward spiral slightly in September of 1929, but by mid-October 1929 the decline gained momentum. On October 24, known as Black Thursday, 12 million shares were traded. Attempts to stabilize the market didn’t work as planned, and by Black Tuesday, stock prices collapsed completely with 16 million shares traded on the New York Stock Exchange in one day. The fall robbed thousands of investors of billions of dollars.

That day spurred the Great Depression, not just in America but around the world, lastingfrom 1929 to 1939 (however, it wasn’t the sole trigger). This was to be the worst and longest-lasting economic downturn ever felt in the Western industrialized world up to that point.

By 1931, 2,000 banks closed their doors. That number doubled to 4,000 by 1934. People lost their life savings, amounting to tens of thousands to hundreds of thousands of dollars. Even those on the brink of retirement had nothing to show for their decades of hard work.

President Roosevelt created the FDIC in 1933 to protect customers’ deposits and restore confidence in the public. The bank runs ended but the market never really recovered for another six years. In fact, by 1932, stocks were worth roughly 20 percent of the value they commanded back in the summer of 1929. By 1933, the unemployment rate affected 30 percent of the workforce or 15 million people.

We’ve had some bumps and other collapses since that fateful day in 1929, but Black Tuesday remains one of the most devastating financial collapses in history. Stock broker fraud also continues to plague our nation’s brokers which is why you should have a stock broker fraud lawyer in your corner.

Sophie Green: Sophie's blog focuses on e-commerce strategies and trends. Her background as an e-commerce entrepreneur informs her insightful posts.

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