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.