Wall Street Crash
The New York stock market fell for four days in late October 1929 and lost about a quarter of its value. The decade had produced a genuine boom — electrification, cars, radio, consumer credit — and then a speculation on top of it. Shares could be bought on margin with as little as ten per cent down, borrowed from brokers who borrowed from banks, so that a modest fall wiped out the buyer and forced a sale. Investment trusts held other trusts' shares in pyramids that multiplied the leverage further. The Federal Reserve had raised rates in August to cool it. Prices peaked on 3 September. Black Thursday, 24 October, saw a wave of selling that a consortium of bankers steadied by conspicuously buying at above-market prices, which is what had worked in 1907. It held for a weekend. Black Monday and Black Tuesday, 28 and 29 October, ended it — sixteen million shares traded on the Tuesday, and the ticker ran hours behind so that nobody knew what anything was worth. The market kept falling for nearly three years, reaching a low in July 1932 about eighty-nine per cent below the peak. The crash did not by itself cause the Depression. What turned a severe recession into a decade was the banking collapse that followed — some 9,000 banks failed, taking deposits with them — and a Federal Reserve that let the money supply contract by a third, and the Smoot-Hawley tariff. The index did not recover its 1929 level until 1954. Deposit insurance and the separation of commercial from investment banking both date from the response to it.
- Year: 1929 CE
- Category: Economic
