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What was the Crash of 1929?

The stock market is closely tied to the health of the economy.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 17 April 2014
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The Crash of 1929 is often thought of as heralding the Great Depression in the United States. Though historians debate this point, the sudden, swift and significant downturn of the stock market took the fortunes of many and left many in huge debt because they had borrowed to obtain stock. Some people are under the mistaken impression that the Crash of 1929 refers to a single day, but in fact, several days and their aftermath encompass the Crash.

The 1920s had been a time of growing prosperity, and interest in the stock market, prospecting and investing grew because so many owed their prosperity to investments that paid off big. Not only the wealthy, but also many people of average income saw the stock market as a way to get rich quick, so investment of all or most of people's funds was extremely high. Then came Black Tuesday on 24 October 1929, considered the first day of the Crash of 1929.

On Black Tuesday, stock prices plummeted, which created considerable panic among investors. Some chose to wait it out, while others quickly sold. This combination of investors staying put, and others selling quickly, or even buying stocks sold at lower prices, meant the remaining week was filled with considerable instability in the stock market. By the next week, panic was extreme, resulting in the morbidly named Black Monday on 28 October 1929, where people sold as much as they could, creating lower and lower valued stock.

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By the next day, with people still anxiously selling what they could get rid of, many were “ruined” financially. Those who kept their stock ended up with stock that might take a lifetime to recover in price, and sometimes never did when companies issuing such stock went out of business. Since many businesses had considerable holdings in the stock market, businesses and individuals were both affected.

Through most of November, prices continued to decline, and if people hadn’t panicked by the end of October, they were certainly well on their way to financial ruin by mid-November. By then it was too late for most. By the end of Black Monday, the stock market has lost approximately $14 billion US Dollars (USD) of its value. Total loss in the first week of the Crash of 1929 was roughly $30 billion USD.

Did the Crash of 1929 result in the Great Depression? You may never get a single answer from historians or economists. Many believe that the considerable economic boom of the 1920s led to an inevitable “bust,” and that this was merely part of a standard economic cycle.

It is true that the Crash of 1929 caused many people to lose their savings and their homes due to the inability to meet loans. Moreover, businesses folded at a rapid rate, affecting even non-investors who were suddenly faced with high unemployment rates. It certainly can’t be viewed as the single reason for the Depression, though it was definitely, no matter how interpreted, a major contributing factor to the very rough economic times that followed.

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