Why exactly did the stock market crash of 1929 happen? what made it suddenly drop so much?
The Wall Street Crash, also commonly referred to as "Black Thursday" took place on 24 Oct 1929, when the NYSE collapsed and continued to fall for a whole month. It is the worst market crash in history. The Dow Jones lost $30 billion in a week.
The decade before the Crash [commonly known as the "Roaring Twenties"] was a time of lavish lifestyles, excessive consumer spending [and debt!] and wealth and plenty. This led to millions of Americans speculating in stocks with people borrowing money to buy more stocks. There was more money out on loan than the entire amount of currency circulating in the US at the time. The rising share prices encouraged more people to invest; people hoped the share prices would rise further. From 1921 to 1929, the Dow Jones rocketed from 60 to 400! Millionaires were created instantly. Soon stock market trading became America’s favorite pastime as investors jockeyed to make a quick killing. Investors mortgaged their homes, and foolishly invested their life savings in hot stocks, such as Ford and RCA. To the average investor, stocks were a sure thing. Few people actually studied the fundamentals of the companies they invested in. Thousands of fraudulent companies were formed to hoodwink unsavvy investors. Most investors never even thought a crash was possible. To them, the stock market “always went up”. Speculation thus fueled further rises and created a credit-inspired economic bubble.
When the market turned downward suddenly, the "panic-selling" started, bringing the market to its knees. After this Crash, the differentiation between commercial banks and investment banks.
There are still debates between economists about what caused such devastation and more than one reasons is given. It is however rather generally agreed that the "stock boom" of the 1920s went too far and caused the Crash.
The Wall Street Crash, also commonly referred to as "Black Thursday" took place on 24 Oct 1929, when the NYSE collapsed and continued to fall for a whole month. It is the worst market crash in history. The Dow Jones lost $30 billion in a week.
The decade before the Crash [commonly known as the "Roaring Twenties"] was a time of lavish lifestyles, excessive consumer spending [and debt!] and wealth and plenty. This led to millions of Americans speculating in stocks with people borrowing money to buy more stocks. There was more money out on loan than the entire amount of currency circulating in the US at the time. The rising share prices encouraged more people to invest; people hoped the share prices would rise further. From 1921 to 1929, the Dow Jones rocketed from 60 to 400! Millionaires were created instantly. Soon stock market trading became America’s favorite pastime as investors jockeyed to make a quick killing. Investors mortgaged their homes, and foolishly invested their life savings in hot stocks, such as Ford and RCA. To the average investor, stocks were a sure thing. Few people actually studied the fundamentals of the companies they invested in. Thousands of fraudulent companies were formed to hoodwink unsavvy investors. Most investors never even thought a crash was possible. To them, the stock market “always went up”. Speculation thus fueled further rises and created a credit-inspired economic bubble.
When the market turned downward suddenly, the "panic-selling" started, bringing the market to its knees. After this Crash, the differentiation between commercial banks and investment banks.
There are still debates between economists about what caused such devastation and more than one reasons is given. It is however rather generally agreed that the "stock boom" of the 1920s went too far and caused the Crash.
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