Atlantis Online
June 28, 2022, 12:45:44 am
Welcome, Guest. Please login or register.

Login with username, password and session length
News: THE SEARCH FOR ATLANTIS IN CUBA
A Report by Andrew Collins
http://www.andrewcollins.com/page/articles/atlantiscuba.htm
 
  Home Help Arcade Gallery Links Staff List Calendar Login Register  

Wall Street Crash of 1929

Pages: [1] 2   Go Down
  Print  
Author Topic: Wall Street Crash of 1929  (Read 6179 times)
Brytani Shea
Superhero Member
******
Posts: 2109



« on: January 10, 2009, 06:53:03 am »

Wall Street Crash of 1929



A solemn crowd gathers outside the Stock Exchange after the crash. 1929.

The Wall Street Crash of 1929,[1][2] also known as the ’29 Crash,[3] the Crash of 1929,[4] the Great Crash of 1929,[5] the Great Crash of October 1929,[6] the Great Wall Street Crash of 1929,[7] 1929 Great Crash,[8] the Great Crash, or the great crashing of the street on wall was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and longevity of its fallout.[9]
Report Spam   Logged

Share on Facebook Share on Twitter

Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #1 on: January 10, 2009, 06:54:17 am »

Three phrases - Black Thursday, Black Monday, and Black Tuesday - are used to describe this collapse of stock values. All three are appropriate, for the crash was not a one-day affair. The initial crash occurred on Black Thursday (October 24, 1929), but it was the catastrophic downturn of Black Monday and Tuesday (October 28 and October 29, 1929) that precipitated widespread panic and the onset of unprecedented and long-lasting consequences for the United States. The collapse continued for a month.

Economists and historians disagree as to what role the crash played in subsequent economic, social, and political events. In a 1998 article The Economist argued, "Briefly, the Depression did not start with the stockmarket crash."[10] Nor was it clear at the time of the crash that a depression was starting. On November 23, 1929, The Economist 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? ... Experts are agreed that there must be some setback, but there is not yet sufficient evidence to prove that it will be long or that it need go to the length of producing a general industrial depression." But The Economist cautioned: "Some bank failures, no doubt, are also to be expected. In the circumstances will the banks have any margin left for financing commercial and industrial enterprises or will they not? The position of the banks is without doubt the key to the situation, and what this is going to be cannot be properly assessed until the dust has cleared away."
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #2 on: January 10, 2009, 06:54:36 am »

The October 1929 crash came during a period of declining real estate values in the United States (which peaked in 1925) near the beginning of a chain of events that led to the Great Depression, a period of economic decline in the industrialized nations.

At the time of the crash, New York City had grown to be a major metropolis, and its Wall Street district was one of the world's leading financial centers.The New York Stock Exchange (NYSE) was the largest stock market in the world.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #3 on: January 10, 2009, 06:55:31 am »

The Roaring Twenties, which was a precursor to the Crash, was a time of prosperity and excess in the city, and despite warnings against speculation, many believed that the market could sustain high price levels. Shortly before the crash, Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau." The euphoria and financial gains of the great bull market were shattered on Black Thursday, when share prices on the NYSE collapsed. Stock prices fell on that day and they continued to fall, at an unprecedented rate, for a full month.

In the days leading up to Black Tuesday, the market was severely unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot-Hawley Tariff Act, which was then being debated in Congress. After the crash, the Dow Jones Industrial Average (DJIA) recovered early in 1930, only to reverse and crash again, reaching a low point of the great bear market in 1932. The Dow did not return to pre-1929 levels until late 1954, and was lower at its July 8, 1932 level than it had been since the 1800s.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #4 on: January 10, 2009, 06:56:25 am »

“ Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even. ”

—Richard M. Salsman
 
« Last Edit: January 10, 2009, 06:57:21 am by Brytani Shea » Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #5 on: January 10, 2009, 06:58:15 am »



The trading floor of the New York Stock Exchange just after the crash of 1929. (public domain)

Page source: http://hoover.archives.gov/exhibits/Hooverstory/gallery06/gallery06.html

Image source: http://www.ecommcode2.com/hoover/research/photos/images/1930-67B.gif

Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #6 on: January 10, 2009, 06:59:16 am »

Timeline

After a six-year run when the world saw the Dow Jones Industrial Average increase in value fivefold, prices peaked at 381.17 on September 3, 1929. The market then fell sharply for a month, losing 17% of its value on the initial leg down.

Prices then recovered more than half of the losses over the next week, only to turn back down immediately afterwards. The decline then accelerated into the so-called "Black Thursday", October 24, 1929. A record number of 12.9 million shares were traded on that day.

At 1 p.m. on Friday, October 25, several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor. The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As amazed traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to a tactic that ended the Panic of 1907, and succeeded in halting the slide that day. In this case, however, the respite was only temporary.

Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #7 on: January 10, 2009, 07:00:21 am »

Over the weekend, the events were covered by the newspapers across the United States. On Monday, October 28, the first "Black Monday",[20] more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 13%. The next day, "Black Tuesday", October 29, 1929, about 16 million shares were traded. The volume on stocks traded on October 29, 1929 was "...a record that was not broken for nearly 40 years, in 1968." Author Richard M. Salsman wrote that on October 29—amid rumors that U.S. President Herbert Hoover would not veto the pending Hawley-Smoot Tariff bill—stock prices crashed even further."[18] William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide. The DJIA lost another 12% that day. The ticker did not stop running until about 7:45 that evening. The market lost $14 billion in value that day, bringing the loss for the week to $30 billion, ten times more than the annual budget of the federal government, far more than the U.S. had spent in all of World War I.

Dow Jones Industrial Average for 10/28/1929 and 10/29/1929 date change % change close
October 28, 1929 -38.33 -12.82 260.64
October 29, 1929 -30.57 -11.73 230.07

Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #8 on: January 10, 2009, 07:00:57 am »

An interim bottom occurred on November 13, with the Dow closing at 198.6 that day. The market recovered for several months from that point, with the Dow reaching a secondary peak (ie, dead cat bounce) at 294.0 in April 1930. The market embarked on a steady slide in April 1931 that did not end until 1932 when the Dow closed at 41.22 on July 8, concluding a shattering 89% decline from the peak. This was the lowest the stock market had been since the 19th century.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #9 on: January 10, 2009, 07:02:04 am »

The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundreds of thousands of Americans to invest heavily in the stock market, a significant number even borrowing money to buy more stock. By August 1929, brokers were routinely lending small investors more than 2/3 of the face value of the stocks they were buying. Over $8.5 billion was out on loan, more than the entire amount of currency circulating in the U.S. The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929, clearly above historical norms. Most economists view this event as the most dramatic in modern economic history. On October 24, 1929 (with the Dow just past its September 3 peak of 381.17), the market finally turned down, and panic selling started. 12,894,650 shares were traded in a single day as people desperately tried to mitigate the situation. This mass sale is often considered a major contributing factor to the Great Depression. Some hold that political over-reactions to the crash, such as the passage of the Smoot-Hawley Tariff Act through the U.S. Congress, caused more harm than the crash itself. According to "Thomas K. McCraw, a professor at the Harvard Business School," the Smoot-Hawley Tariff Act "...exacerbated the problem by preventing Europeans from selling enough goods in the United States to earn enough money to pay off their debts from World War I.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #10 on: January 10, 2009, 07:02:48 am »



Graph of the 1929 crash on Wall Street as part of a timeline from Oct 1928 - Oct 1930.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #11 on: January 10, 2009, 07:03:47 am »

Official investigation of the Crash

In 1931, the Pecora Commission was established by the U.S. Senate to study the causes of the crash. The U.S. Congress passed the Glass-Steagall Act in 1933, which mandated a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.

After the experience of the 1929 crash, stock markets around the world instituted measures to temporarily suspend trading in the event of rapid declines, claiming that they would prevent such panic sales. The one-day crash of Black Monday, October 19, 1987, however, was even more severe than the crash of 1929, when the Dow Jones Industrial Average fell a full 22.6%. (The markets quickly recovered, posting the largest one-day increase since 1933 only two days later.)

Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #12 on: January 10, 2009, 07:05:33 am »

Impact and academic debate

Together, the 1929 stock market crash and the Great Depression "...was the biggest financial crisis of the" 20th century.  "The panic of that October day has come to serve as a symbol of the economic contraction that gripped the world during the next decade." "The crash of 1929 caused 'fear mixed with a vertiginous disorientation', but 'shock was quickly cauterized with denial, both official and mass-delusional'." "The falls in share prices on October 24 and 29, 1929 ... were practically instantaneous in all financial markets, except Japan." The Wall Street Crash had a major impact on the U.S. and world economy, and it has been the source of intense academic debate—historical, economic and political—from its aftermath until the present day. "Some people believed that abuses by utility holding companies contributed to the Wall Street Crash of 1929 and the Depression that followed." "Many people blamed the crash on commercial banks that were too eager to put deposits at risk on the stock market. "

The "1929 crash brought the Roaring Twenties shuddering to a halt." As "tentatively expressed" by "economic historian Charles Kindleberger", in 1929 there was no "...lender of last resort effectively present", which, if it had existed and were "properly exercised", would have been "key in shortening the business slowdowns that normally follows financial crises." The crash marked the beginning of widespread and long-lasting consequences for the United States. The main question is: Did the "'29 Crash spark The Depression?", or did it merely coincide with the bursting of a credit-inspired economic bubble? The decline in stock prices caused bankruptcies and severe macroeconomic difficulties including business closures, firing of workers and other economic repression measures. The resultant rise of mass unemployment and the depression is seen as a direct result of the crash, though it is by no means the sole event that contributed to the depression; it is usually seen as having the greatest impact on the events that followed. Therefore the Wall Street Crash is widely regarded as signaling the downward economic slide that initiated the Great Depression.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #13 on: January 10, 2009, 07:06:50 am »

True or not, the consequences were dire for almost everybody. "Most academic experts agree on one aspect of the crash: It wiped out billions of dollars of wealth in one day, and this immediately depressed consumer buying." The failure set off a worldwide run on US gold deposits (i.e., the dollar), and forced the Federal Reserve to raise interest rates into the slump. Some 4,000 lenders were ultimately driven to the wall. Also, the uptick rule, which "...allowed short selling only when the last tick in a stock’s price was positive," "...was implemented after the 1929 market crash to prevent short sellers from driving the price of a stock down in a bear run."

Many academics see the Wall Street Crash of 1929 as part of a historical process that was a part of the new theories of boom and bust. According to economists such as Joseph Schumpeter and Nikolai Kondratieff the crash was merely a historical event in the continuing process known as economic cycles. The impact of the crash was merely to increase the speed at which the cycle proceeded to its next level.

Milton Friedman's monumental A Monetary History of the United States, co-written with Anna Schwartz, makes the now standard interpretation of what made the "great contraction" so severe. It was not the downturn in the business cycle, trade protectionism or the 1929 stock market crash that plunged the country into deep depression. It was the collapse of the banking system during three waves of panics over the 1930-33 period.
Report Spam   Logged
Brytani Shea
Superhero Member
******
Posts: 2109



« Reply #14 on: January 10, 2009, 07:19:02 am »

Timeline: A selected Wall Street chronology
 

1653-1918 | 1923-2000 
 


1923
 October: A bull market begins. It will continue growing for nearly six years.
 
1928
 April 13: The N.Y.S.E. introduces new and improved high-speed tickers. The devices can print 500 characters per minute, almost twice as fast as the earlier models.
 
1929
  February: Astrologer Evangeline Adams, who counts Charlie Chaplin, Mary Pickford, and J. P. Morgan among her clients, predicts the market will rise in the coming months.

March 4: President Herbert Hoover is inaugurated. Nicknamed "The Great Engineer," the former geologist and mining engineer takes office amid booming prosperity. During the campaign, he has promised: "We shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation."

March 8: Michael J. Meehan begins one of the most successful brokerage pools in Wall Street history. Over the next ten days, he drives the value of R.C.A. stock up almost 50%. In today's money, his pool will make the colluding investors $100 million.

March 15: Newspapers quote Treasury Secretary Andrew Mellon saying there are bargains to be found in the bond market. Wall Street is in the midst of a buying frenzy. As the market rises, some begin to fear it will soon collapse. The Federal Reserve Board meets, but does not make any public statements.

March 25: A mini-crash begins as investors start to sell, revealing the market's shaky foundations. For the many people playing the market with borrowed money, the day is a disaster, as margin calls wipe out their holdings. While the investors seek to borrow more money, interest rates soar to 20 percent. The New York Daily News calls it a "selling avalanche."

March 27: Banker Charles Mitchell announces that the national city bank will provide $25 million in credit to stop the market's slide. His move stops the panic, and call money declines from 20 to eight percent. Senator and former Treasury Secretary Carter Glass calls for Mitchell to resign from his post on the Federal Reserve Board because of his intervention in the market.

Spring: The American economy shows ominous signs of trouble. Steel production is declining, construction is sluggish, car sales are down, and consumers are building up high debts because of easy credit. Yet the stock market continues its upward momentum, heedless of real economic indicators.

May 14: The N.Y.S.E. opens a new bond room, adding 6,000 feet to the trading floor.

Summer: The market continues to rebound, and stocks hit record levels month after month.

August 17: Michael Meehan's brokerage firm launches a new service: an office aboard ocean liners, including the Berengaria. This convenience allows transatlantic passengers to buy or sell shares during the weeklong passage between the U.S. and Europe.

September 3: After a surge of optimism, the bull market reaches its peak -- the Dow Jones Industrial Average closes at 381.17. A newspaper headline trumpets, "Public Demand for Stock Appears Insatiable."

September 5: Bearish economist Roger Babson gives a speech, saying, "Sooner or later, a crash is coming, and it may be terrific." He has been delivering this message for two years, but for the first time, investors listen. The market takes a severe dip, which will be called the "Babson Break." The next day, prices will stabilize, but the collapse has begun.

Mid-September: The market fluctuates wildly up and down.

October 24: "Black Thursday." The economic bubble finally bursts. Stock prices fall sharply on a day of heavy liquidation. Ticker tape runs four hours later than normal at a volume of 12.9 million shares. Headlines will report the market's paper loss at $5 billion. A pool of bankers act to stem the drop by putting more money into the market, and President Hoover reassures Americans that U.S. business is sound. Within a few days, a headline will read, "Brokers Believe Worst is Over and Recommend Buying of Real Bargains."

October 28: "Black Monday." The stock market falls 22.6%, the highest one-day decline in U.S. history. The crash triggers similar declines in markets around the world.

October 29: "Black Tuesday." Panic sets in as investors all try to sell their stocks at once. Over 16 million shares of stock are sold, setting a record -- and the market records over $14 billion in paper losses. Stock tickers cannot keep up with the heavy trading volume. At the end of the day, the market is down 33 points, more than 12.8%. Some of the nation's financial elite, including General Motors' William C. Durant and the Rockefeller family, show confidence by buying stocks, but their efforts fail to stem the tide.

November 23: After weeks in freefall, the market hits its bottom and stabilizes. The New York Times reports, "Regular Schedule to be Resumed, but Trading Will Be Suspended Last Half of Week; Business Nearly Normal." The market's daily volume is at 3 million shares with "orderly although irregular" prices.
 
1931
 January 7: A report released by the Committee for Unemployment Relief states that over four million Americans are unemployed.
 
1932
 July 8: The Dow Jones Industrial Average reaches its lowest point of the Great Depression, closing at 41.22, down 89 percent from its peak in 1929.
 
1934
 October 1: The Securities and Exchange Commission is created to regulate stocks, bonds and other commissions. Kennedy patriarch and former Wall Street speculator Joseph P. Kennedy is appointed as its chairman.
 
1941
 December 8: The day after a Japanese surprise attack on Pearl Harbor in Hawaii, the U.S. enters World War II.
 
1943
 Women are allowed to enter the N.Y.S.E. trading floor for the first time.
 
1945
 September 2: Japan formally surrenders to the U.S., ending World War II. The U.S. enters a new era of prosperity, with New York City becoming a global financial and cultural capital.
 
1957
 March 4: The Standard & Poor 500 Index is introduced. Computer technology allows the S & P 500 to calculate and report market levels at one-minute intervals throughout the day.
 
1962
 June 22: The N.Y.S.E.'s census of shareholders reports that 17 million Americans own stock, a 10 million increase since 1952.
 
1963
 November 22: In anticipation of panic selling, Wall Street closes shortly after President John F. Kennedy is assassinated.
 
1970
 February 12: Joseph L. Searles III becomes the first African American to be accepted as a member of the N.Y.S.E.
 
1971
 February 8: The National Association of Securities Dealers Automated Quotation (N.A.S.D.A.Q.) opens its first day of trading, becoming the world's first electronic stock market.
 
1972
 November 14: The Dow Jones Industrial Average closes the day over 1000 points for the first time.
 
1987
 October 19: The stock market crashes and the Dow Jones Industrial Average drops 508 points or 22.61 percent, its largest one-day percentage drop in history.
 
1994
 August: The first Internet stock trade is completed by K. Aufhauser & Company, Inc., launching a new era of online stock trading.
 
1995
 November 21: The stock market closes with the Dow Jones Industrial Average at 5023.55, topping 5000 for the first time.
 
1996
 Real-time stock tickers are used on cable television channels CNBC and CNN-FN. Market data, which had previously been delayed 20 minutes, is now reported in real time.
 
1997
 A crisis in Asia's financial markets triggers a global stock sell-off, leading the Dow Jones Industrial Average to fall 554 points -- its largest single-day point drop.
 
1999
 March 19: The Dow Jones industrial average tops 10,000 points for the first time.
 
2000
 April 14: The Dow Jones industrial average falls 617.78 points, its largest single-day point decline to date.
 
http://www.pbs.org/wgbh/amex/crash/timeline/timeline2.html
Report Spam   Logged
Pages: [1] 2   Go Up
  Print  
 
Jump to:  

Powered by EzPortal
Bookmark this site! | Upgrade This Forum
SMF For Free - Create your own Forum
Powered by SMF | SMF © 2016, Simple Machines
Privacy Policy