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The stock market crash of 1929, also known as Black Tuesday, was a massive economic disaster that caused the Great Depression and the worst economic recession in history. So how did it happen? What were the causes of the crash? How did it lead to so much economic devastation? This article details exactly what happened on Black Tuesday, what led up to the crash, and why it had such catastrophic effects on the economy.

What Caused The Stock Market Crash?

Stock Market Crash of 1929: Black Tuesday Cause & Effects - HISTORY

On October 29, 1929, Black Tuesday hit Wall Street as investors traded 16 million shares on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors. The crash was caused by a combination of factors, including the overextension of credit, overproduction in some industries, and uneven distribution of wealth.

Although a catalyst such as Black Tuesday is never enough to cause a crash, it can act as a spark that sets off a chain reaction. The crash was caused by various factors in combination with overconfidence in future prosperity and an oversupply of goods. For example, stock prices had been rising steadily in 1928 and early 1929. While some economists believed that stocks were overvalued at that point, most experts maintained that conditions were stable and poised for continued growth. As long as investors believed they could keep making money, however, they would continue to buy shares regardless of whether or not they would be profitable investments.

What Happened On Black Tuesday, October 29, 1929?

Stock Market Crash of 1929: Black Tuesday Cause & Effects - HISTORY

On Black Tuesday, the stock market crashed, starting the Great Depression. It was the worst day in stock market history, with the Dow Jones Industrial Average falling by 23%. More than 16 million shares were traded on the New York Stock Exchange. Many people lost their life savings, and banks and businesses failed. The crash led to a worldwide economic downturn that lasted for years.

The effects of Black Tuesday were widespread. President Herbert Hoover said it was the greatest calamity in history and worried that all our present difficulties will be eclipsed by those now confronting us. Banks became less willing to lend, prices fell, and international trade declined. Employers laid off workers, who had little they could do but hope their skills would be useful in another job. By May 1930, 13 million Americans were unemployed—one out of every four people who had a job. It took more than a decade for stock prices to recover from Black Tuesday and for national income to fully return to its 1928 level. It would take much longer for many people’s savings to recover as well, if they ever did at all.

Who Were the Biggest Losers?

Stock market crashes on Black Tuesday - HISTORY

On October 29, 1929, also known as Black Tuesday, the stock market crashed. This was the largest stock market crash in history. Many people lost a lot of money. The biggest losers were the banks and other financial institutions that had invested heavily in the stock market. All those speculators who were buying stocks on margin got wiped out. Thousands of businesses closed down or cut staff just so they could survive during this depression-era time period. As of April 1932, one quarter of American workers were unemployed. What did not help matters was that no one knew how long this situation would last; it seemed like forever. It wasn’t until 1935 when some sectors began to pick up again.

A lot of people bought stocks with borrowed money – they used their stocks as collateral for loans. When the prices of these stocks dropped, these investors couldn’t repay their loans, so they sold everything to raise cash to pay off their debts – which caused prices to drop even more. The problem snowballed from there and pretty soon many companies went bankrupt because they didn’t have enough cash to pay back their loans.

What was the Impact of the Great Depression?

Black Thursday 1929: Facts, Causes, and Effects

The Great Depression was the worst economic downturn in the history of the industrialized world. It began in the United States, but quickly spread throughout the globe. By 1933, unemployment in America had reached 25%, and in some countries it was as high as 33%. The Great Depression also caused a decrease in global trade, as well as a decrease in output and investment. These factors led to a decrease in demand for goods and services, which further exacerbated the effects of the Depression.

One of its most famous effects was a sudden and dramatic decline in global stock prices. Over a few weeks in October, about 13 million shares were traded daily on the New York Stock Exchange (NYSE). By mid-November, only 3 million shares were being traded daily. In total, about $30 billion was lost on Black Tuesday alone ($683 billion in today’s dollars). The U.S. Federal Reserve did not start pumping money into the economy until 1931, when it faced heavy pressure from Congress to deal with the banking crisis. Thus, American banks faced liquidity problems due to lack of funds that they could lend out; they became insolvent and fell one by one because bank runs happened more often than before.

More than 5400 banks collapsed during this time period, meaning that more than 9% of all banks operating in 1930 no longer exist today.

Where Are We Now?

The New York Stock Exchange | NYSE

On October 29, 1929, the stock market crashed, causing the Great Depression. Black Tuesday is considered to be the worst day in stock market history. Today, the stock market is doing well and has recovered from the crash. However, many people are still affected by the Great Depression. Recently, NPR (National Public Radio) interviewed a man who lived through the Great Depression as a child. He recalled that his family was poor and that they had lost their house during this time period. Though he spoke positively about his childhood, he explained that even after decades, some of his earliest memories were those related to poverty and hunger during the Great Depression.

Today, our country has experienced economic growth unlike any other time in history. Unemployment is low and consumer confidence is high. There is not much worry about an imminent crash, but that does not mean we have learned from our past mistakes. According to The Lost Decade by David Schoenbrun and Scott Stossel, income inequality since 1999 has been increasing at a faster rate than any other time in US history since 1928-1929. We are headed down a dangerous path, and it would be extremely beneficial for us to understand our history and to avoid repeating it in order to ensure more balanced growth as we enter another recession period.

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