Wall Street Crash of 1929

Introduction

• Also known as the Great Crash
• Major stock market crash in the United States
• Began in October 1929
• Marked the start of the Great Depression
• Significant dates:
  • Black Thursday (October 24, 1929): Record 12.9 million shares traded
  • Black Tuesday (October 29, 1929): Around 16.4 million shares traded

Background

• Roaring Twenties: Period of economic prosperity and industrial expansion
• Widespread stock market speculation
• Agricultural sector depressed due to overproduction
• Low wages led to reduced consumer purchasing power
• Economy showed signs of trouble by 1929

Causes of the Crash

• Overvaluation of stocks; prices exceeded real value
• Early warnings from economists like Roger Babson
• "Babson Break" in September 1929
• Jailing of British investor Clarence Hatry weakened confidence
• Debate over the Smoot-Hawley Tariff Act

The Crash

• October 23, 1929: Initial sharp decline
• Black Thursday: Bankers attempted to stabilize by purchasing stocks
• Black Monday (October 28, 1929): Record loss in Dow
• Black Tuesday: Continued panic selling, huge volume, ticker tape delays

Aftermath

• Stock market continued to decline until 1932
• Pecora Commission was established in 1932
• Glass-Steagall Act passed in 1933, separating commercial and investment banking
• Introduction of trading suspension practices

Analysis

• Speculative boom in the late 1920s
• Margin buying and economic bubble
• Over $8.5 billion in loans for stock purchasing
• High price-to-earnings ratio

Effects

United States

• Triggered the Great Depression
• Bank failures and business closures
• Mass unemployment and economic contraction

Europe

• Led to the Great Depression in Europe
• Interconnected global economies
• Public protests and strikes in the UK

Academic Debate

• Role of the crash in the Great Depression
• Friedman and Schwartz's argument on banking system collapse

References

• Stock market crash as a symbol of the economic contraction
• Ongoing debate on its impact and causes

These notes provide an overview of the Wall Street Crash of 1929, its causes, events during the crash, and the subsequent effects on the economy in the United States and Europe. The crash was pivotal in leading to the Great Depression, although its exact role remains a subject of historical debate.