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Analyzing the 1929 Stock Market Crash

May 8, 2025

The Stock Market Crash of 1929 and the Great Depression

Introduction

  • The "Roaring Twenties" was a period of significant economic and social growth in the U.S.
  • This era ended in October 1929 with a stock market crash, leading to the Great Depression.
  • The U.S. economy shrank by 36% from 1929 to 1933, with a severe impact on banks and unemployment.

Key Takeaways

  • The crash occurred in October 1929, wiping out billions and starting the Great Depression.
  • It began on "Black Thursday" and extended with "Black Monday" and "Black Tuesday."
  • The Dow Jones Industrial Average (DJIA) dropped significantly during this period.

Black Thursday

  • The crash started on Oct. 24, 1929, known as Black Thursday.
  • The market opened 11% lower; attempts to stabilize it were short-lived.
  • Led to further declines on Black Monday and Black Tuesday.

Economic Growth and Speculation Before the Crash

  • Early 1920s: Success in exports to Europe, low unemployment, economic boom.
  • Stock market speculation became widespread, even among those who couldn't afford it.
  • Many bought stocks on margin, increasing financial instability.

Overproduction and Market Oversupply

  • Excess production in industries led to oversupply.
  • Companies invested optimistically, but markets could not absorb excess products.
  • Agricultural prices fell, causing economic strain on farmers.

Global Trade and Tariffs

  • U.S. tariffs on imports led to retaliatory tariffs from other nations.
  • Global trade dropped by 66% from 1929 to 1934, worsening the economic situation.

Excess Debt and Margin Trading

  • Margin trading amplified gains and losses.
  • Banks issued margin calls when the market fell, leading to liquidations.
  • Lack of cash reserves led to widespread financial ruin for investors.

Aftermath of the Crash

  • The crash and subsequent Depression affected all societal segments.
  • Marked a shift from optimism of the 1920s to economic hardship.

Causes of the 1929 Crash

  • Overinflated share prices, bank loans, overproduction, panic selling.
  • Stocks bought on margin and high interest rates contributed.
  • Media panic and negative sentiment worsened the situation.

Why the Crash Led to the Great Depression

  • Widespread financial losses for businesses and individuals.
  • Businesses closed, and savings were lost, deepening the Depression.

End of the Great Depression

  • World War II shifted the economy to a war footing, ending the Depression.

Conclusion

  • The 1929 crash was multifaceted, with lessons learned impacting future economic policies.
  • It highlighted the dangers of speculative bubbles, overproduction, and lack of regulation.