March 1929 marked the onset of a series of events that eventually led to the great stock crash which occurred between 24th October 1929(Black Thursday) and 29th October 1929 when the stock share prices of New York collapsed and lost over $30 billion. This stock crash is what is famously known as the Wall Street Crash.
The headline of Variety proclaims ‘Wall St. Lays An Egg’ after the October 29, 1929 crash of the Stock Market. (Photo by Library of Congress/Corbis/VCG via Getty Images)
On 25th March 1929, the Federal Reserve which is the Central Banking System of the United States issued a warning on the excessive speculation that was on the rise. After the warning, many investors panicked and started to sell out their stock shares rapidly facilitating a mini stock crash. Following the events, Charles E. Mitchell, a banker with National City Bank provided $25 million to try and salvage the situation. The tactic managed to halt the market slide temporarily.
Despite the two market breaks recorded in March and June, the stock trade inclined even more as from June all the way to September, a duration whereby the Dow Jones Industrial Average increased tremendously by almost a solid tenfold peaking at a rich 381.17. Given the increase in the industrial value, more and more investors speculated.
WALL STREET CRASH, 1929. Interior of the New York Stock Exchange on ‘Black Friday,’ 25 October, 1929. (Photo by ullstein bild/ullstein bild via Getty Images)
People went out and took loans and borrowed money just to meet their buying of the stock shares with the hope that the rewards would cover their tracks, call it, “the end justifies the means.” They believed in the inherent stability of the market, and we’re confident about the rewarding benefits they anticipated. This hope was cut when Roger Babson, a financial expert predicted the coming of a crash that was shortly followed by an actual crash that was then named after him, the “Babson Crash.”
The Frantic Panic
On 20th September 1929, the London Stock exchange crashed after it was discovered that the top British investor and many of his associates were arrested for fraudulent and forgery activities. This ripped off the Band-Aid and threw American investors into a frantic panic.
(Original Caption) No Time to Go Home; New York stock brokers and their clerks worked until early Oct. 30th, checking up transactions in a stock market after 16,400.00 share day Oct. 29th. This photo shows some of the clerks catching up on their sleep in a gym in business section of New York.
Everyone was now looking to sell out their shares. This left the market unstable. However, trading went on, and by mid-October, the selling had intensified. This is because everyone was in great panic and people feared the loss that was now slowly but creeping up on them.
The Raging Intensified Trading
Usually, when more traders are selling any commodity, the flooded marketplace tends to facilitate the drop in prices. By 24th October, the Black Thursday, the intensified selling caused a market drop of up to 11%.
Several Wall Street bankers, with the hope of salvaging the then alarming economic crises, came together and placed a bid to purchase a more massive block of shares. Eventually, the tactic halted the slide on Thursday and Friday.it was not different on Saturday, and since the sales only happen half a day, the impact of the anxiety was felt in the market on Monday.
(Original Caption) 10/24/1929-New York, NY: Thousands in the streets about the N.Y. Stock Exchange as the market experienced the most hectic day of trading in financial history. Billions in paper profits were lost and party regained through record sales of more than 12 million shares. These crowds stormed the steps of the sub treasury in Wall St.
28th October 1929 greeted the New York Time readers with the facts that they were faced with greater margin calls forcing them to leave the market. And that was the final straw, the nail on the head that sent everything into a spiral. On that day, the Dow recorded a loss of 38.33 points which was the equivalent of a 13 percent loss.
By 29th October 1929, 16 million shares were traded. Everyone was looking to sell out, at whatever the cost, as long as he or she sold out. On that day some stocks could not attract any buyers at whatever the price. The Dow lost an additional 30 points which were the equivalent of 12 percent.
The Warning Signs
The decade right after world war one was a time when the economy of America was looking up. It was a period that was precisely characterized by wealth, prosperity and comfortable circumstances.
The industries performed great with some such as those of iron and steel even offered double gains as their expected turnover. America was optimistic, and the market was booming. Owing to the market conditions, many Americans went into stock buying. Moreover, as the value of stocks looked even more attractive by the day, speculation increased with the hope that the stock market would continue to rise even more. This market stability was brought was stalled when America recorded an overproduction in Agricultural produce such as wheat that threatened and caused despair among farmers due to fall in the market price.
Huge crowds outside the Sub Treasury Building (now Federal Hall National Memorial) and the statue of George Washington, opposite the Stock Exchange, New York, at the time of the Wall Street Crash, October 1929. (Photo by Keystone/Getty Images)
However, this was a temporary condition because it was solved when the USA started selling their wheat in international markets. This was enhanced by the emergence of drought that made it possible for America to sell their surplus wheat. The opening of the global market increased the size of the market for the American farmers and later led to reduced competition among the farmers. However, this did not last for a long time because, after the end of the drought, some countries like Australia and France that had turned to America for imports had their wheat.
The Aching Consequences
The crash crippled many businesses and led to the closure of some of them. It was a big blow as people were already drowning in debt. To make matters worse, this crash had a ripple effect on the entire economy as uncertainty stroke and hit a diverse number of areas. Job security was lost because the businesses hiring the people operated in uncertainty. Credit for business operations, expansion or even new projects was no longer available.
Bankrupt investor Walter Thornton tries to sell his luxury roadster for $100 cash on the streets of New York City following the 1929 stock market crash.
As a result, there was difficulty in accessing capital and businesses had to look for ways to minimize the costs of operation. Many people lost their jobs and there was a high rate of unemployment. The decline in job security led to reduced spending habits. People were more cautious in their spending. This led to a crippled economy in America and many western countries. The decline in the Stock exchange led to bankruptcy in major banks across America and Western countries.