On October 29, 1929, the stock market crashed on what became known as Black Tuesday. The crash ended the period known as the Roaring Twenties and ushered in the Great Depression. Here are five things you didn't know about the Stock Market Crash of 1929...
Over Exuberance Was A Major Reason Behind The Crash A major reason behind the crash was that share prices were not driven by economic fundamentals but by over exuberance and false expectation of the investors. The stock market was seen as an opportunity to earn big akin to the gold rush. By 1929, 2 out of every 5 dollars a bank loaned were used to purchase stocks. Share prices became much higher than their real value. The Dow Jones Industrial Average (a stock market index) increased 400% in the period between 1924 and 1929.
Economist Roger Babson Had Predicted The Crash A Month Earlier On September 5, 1929 economist Roger Babson gave a warning "Sooner or later, a crash is coming, and it may be terrific". Over the next few weeks the prices began to move downward. In the last hour of trading on October 23, the stock prices began to fall sharply. The next day, known as Black Thursday, saw prices drop drastically. The following day President Herbert Hoover reassured Americans that business was sound.
The 1929 Crash Was Not a Single-Day Event
October 29 is considered the day of the crash, but it was really the worst day of a series of crashes that took place between October 24 thru October 29. The crash began on Thursday, October 24, so-called Black Thursday. Selling increased on Black Monday (October 28) and Black Tuesday (October 29). So this was not just one day, but several days of sharply falling prices with three especially bad days.
Tales Of Bankers Leaping To Their Death Are Now Regarded As A Myth
It is true that two people committed suicide after the crash by jumping from the upper floors of buildings. One was a clerk who had been overworked from dealing with all the trades, and the other was a produce company boss who had lost a great deal in the crash. However, the stories of mass suicides or of many people jumping were both an exaggeration and possibly a misunderstanding (or two). Humorist Will Rogers had made a morbid joke about standing in line to jump out a window, and comedian Eddie Cantor had also joked about being asked if the hotel room he was reserving was for "sleeping or jumping." But the biggest misunderstanding may have come from Winston Churchill, who at the time of the crash was working as a journalist. He reported that he witnessed someone jump from the upper floors of the hotel he was staying at. However, it is likely that he was referring to a suicide of a tourist who fell before the crash even started.
The Stock Market Did Not Recover For Many Years $25 billion (more than $300 billion in today’s money) was lost in the Wall Street Crash of 1929. Despite efforts from America’s financial elite, the market kept sliding barring minor reliefs. There was another longer steady slide from April 1931 to July 8, 1932, when it reached its lowest point at 41.22, down 89% from its peak. The stock market was not able to reach its pre-crash numbers until 1954, 25 years after the crash of 1929.