Stock market crash of 1929

It is also referred to as the ‘Wall Street Crash’ and the ‘Black Tuesday’. This event had major political and economic implications in the US and also in many other countries. The world had not known that something like this was possible and thus it was shocking as well.

What happened on that day – the 29th of October 1929? The prices of stocks on the New York Stock Exchange or NYSE collapsed and this led to the Great Depression. The Tuesday was not the only day it happened, it also took place on 2 other days on that dark week when there was an enormous upheaval that led to panic selling. These 2 days are also referred to as ‘Black Thursday’ and ‘Black Monday’.

Why did it happen? Part of the reasons lay in the speculative boom that had taken place for quite a while before that week. As prices kept rising, more investors became interested to profit and invested more money. This led to a further rise in the market price of the stocks, which again meant more interest. So the market had got in to a cycle and the boom was out of control and artificial.

And to make matters worse, the banks also came in and loaned out money to help investors profit from the market. And when the bubble burst it led to panic selling – 13 million shares were sold in 1 day, as people desperately wanted to get rid of the stock to bring home whatever money they could. Over the next few days, another 30 million stocks were sold and the prices of scripts collapsed.

Thus many investors went bankrupt and the banks from where they had borrowed capital also suffered majorly. Many banks also failed to survive. As a result, many businesses lost their credit lines and were forced to close. This again, resulted in massive unemployment, which meant that the entire economy was down and out. This finally led to the ‘Great Depression’.