Wall Street Crash of 1929
The Wall Street Crash of 1929, also known as the Great Crash, Crash of '29, or Black Tuesday,[1] was a major American stock market crash that occurred in the autumn of 1929. It began in September, when share prices on the New York Stock Exchange (NYSE) collapsed, and ended in mid-November. The pivotal role of the 1920s' high-flying bull market and the subsequent catastrophic collapse of the NYSE in late 1929 is often highlighted in explanations of the causes of the worldwide Great Depression.
Not to be confused with Blackout Tuesday.It was the most devastating stock market crash in the history of the United States when taking into consideration the full extent and duration of its aftereffects.[2] The Great Crash is mostly associated with October 24, 1929, called Black Thursday, the day of the largest sell-off of shares in U.S. history,[3][4] and October 29, 1929, called Black Tuesday, when investors traded some 16 million shares on the New York Stock Exchange in a single day.[5] The crash, which followed the London Stock Exchange's crash of September, signaled the beginning of the Great Depression.
Aftermath[edit]
In 1932, the Pecora Commission was established by the U.S. Senate to study the causes of the crash.[31] The following year, the U.S. Congress passed the Glass–Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.[32]
Afterwards, stock markets around the world instituted measures to suspend trading in the event of rapid declines, claiming that the measures would prevent such panic sales. However, the one-day crash of Black Monday, October 19, 1987, when the Dow Jones Industrial Average fell 22.6%, as well as Black Monday of March 16, 2020 (−12.9%), were worse in percentage terms than any single day of the 1929 crash (although the combined 25% decline of October 28–29, 1929, was larger than that of October 19, 1987, and remains the worst two-day decline as of March 10, 2023).[33]
Academic debate[edit]
There is a debate among economists and historians as to what role the crash played in subsequent economic, social, and political events. The Economist argued in a 1998 article that the Depression did not start with the stock market crash,[57] nor was it clear at the time of the crash that a depression was starting. They asked, "Can a very serious Stock Exchange collapse produce a serious setback to industry when industrial production is for the most part in a healthy and balanced condition?" They argued that there must be some setback, but there was not yet sufficient evidence to prove that it would be long or would necessarily produce a general industrial depression.[58]
However, The Economist also cautioned that some bank failures were also to be expected and some banks may not have had any reserves left for financing commercial and industrial enterprises. It concluded that the position of the banks was the key to the situation, but what was going to happen could not have been foreseen.[58]
Milton Friedman and Anna Schwartz's A Monetary History of the United States, argues that what made the "great contraction" so severe was not the downturn in the business cycle, protectionism, or the 1929 stock market crash in themselves but the collapse of the banking system during three waves of panics from 1930 to 1933.[59]
