Stock Market Crash In 1930
Financial historians usually blame the crash of the US stock market on October 29, 1929 for the start of the Great Depression. However, there are others who do not agree with this analysis, and believe that the stock market crash was the result of the depression and not the cause for starting the Great Depression. |
From the mid 1920s until the late 1920s, the US stock market expanded rapidly. This expansion continued for the first 6 months after President Herbert Hoover took to office in January 1929. The stock prices rose so high that many called it Hoover Bull Market. Any and everyone from all walks of life was rushing to brokers to invest any extra money they had in the stock market. They thought they could sell these securities for a hefty profit. Many people even mortgaged their homes to raise money to invest in the stock market.
By the summer of 1929, around 300 million shares were bought and sold. Although there were ample warnings that the bubble was going to burst, no one paid any attention.
By September and early October 1929, prices of shares started falling. However, people still continued speculating and these were mostly those who had borrowed money from different sources to purchase shares.
On October 18, the market saw people rushing to sell and buy shares because of the price fall and constant speculation. But the real shocker came on October 24, which is infamously known as Black Thursday. On this day, 12.9 million shares were bought and sold by people who were looking to recoup their losses. Investment companies and banks took steps to block the trading of stock to stop the panic but this attempt failed to help the market.
Again on October 28, 1929, also known as Black Monday, the panic to recoup losses began and this continued the following day, which is known as Black Tuesday, when 16 million shares were bought and sold. Share prices of large companies like General Electric, United States Steel and Radio Corporation of America fell dramatically.
Initially financial leaders thought that this frenzy was just a hiccup in the market. Even President Hoover and the then Treasury Secretary Andrew W. Mellon tried to assure people and businesses that everything was fine and economic prosperity would soon prevail.
Although in the early part of 1930, the market did recover marginally, but by May 1930 again the panic set it. It would be another 20 years before the Dow Jones industrial average could regain some semblance of normality.
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