Tuesday 29th October 1929 will forever be remembered as Black Tuesday, that infamous day when the US stock exchange, located on New York’s Wall Street, crashed.
After the end of the First World War, the US experienced a very prosperous period. The Roaring Twenties, as they came to be known, were a decade of both unprecedented wealth and excess. One particular area affected by excess was the stock market, which saw an incredible amount of speculation. The public saw the stock market as a way to get rich quick, particularly thanks to the practice of buying stocks on margin. This meant that investors secured a loan on a small fraction of the stock’s price and so allowed them to essentially borrow up to 90% of the value of the stock, thereby allowing more people to speculate on the stock market and the value of stocks to increase.
However, the decade was also marked by a decline in aggregate demand (or spending), as producers were producing far more than demand required, driving down prices. The practice of buying stocks on margin made investors much more vulnerable to any change in confidence and, when prices began to decline in September and October of 1929, this sparked a major panic. For those who had bought their stocks on margin, it was now imperative to liquidate their holdings, although this rush to sell only contributed to the worsening problem.
On Thursday 24th October, the panic really kicked in and the stock market went into free fall, with a huge 12.9 million stocks traded on that day. Efforts by several major banks and investment companies temporarily calmed the market, with the Dow Jones Industrial Average eventually closing down just 6 points. However, this was not to last and on Monday 28th October, the market closed down 12.8%. The following day, now known as Black Tuesday, the Dow Jones dropped a further 12%, having lost a whopping 183 points over the course of two months.
The Wall Street Crash was one of a number of contributory factors that led to the Great Depression of the 1930s, which saw 13 million Americans unemployed, a drop of around 80% in construction and of 45% in industrial production. Indeed, the country would not fully begin to emerge from this until the end of the Second World War.
We run a number of trips to New York that take in Wall Street and the Financial District. For example, our business studies tours to New York focus on the city’s role as a global leader in business and finance. For further information, please do not hesitate to contact us.