Black Thursday 1929: Facts, Causes, and Effects By Kimberly Amadeo Updated December 23, 2016 Black Thursday is October 24, 1929, the first day of the stock market crash of 1929 . That was the worst stock market crash in U.S. history, kicking off the Great Depression . What Happened Even before the New York Stock Exchange opened, investors were panicky. The Dow Jones Industrial Average had fallen 4.6 percent the day before. The Washington Post headline screamed, "Huge Selling Wave Creates Near-Panic as Stocks Collapse." The market opened at 305.85. It immediately fell 11 percent during intra-day trading. That's slightly more than a stock market correction . That worried Wall Street bankers. The stock market had already fallen nearly 20 percent since its record close of 381.2 on September 3, 1929. Even worse, trading volume was 12.9 million shares, or three times the normal amount . The three leading banks at that time were Morgan Bank, Chase National Bank, and National City Bank of New York.

They bought stocks just to restore confidence in the markets. The intervention seemed to work. The Dow recovered a bit, closing just 2 percent down, at 299.47. (Source: " 1929 Crash ," San Francisco University.) On Friday, the Dow closed higher, at 301.22. But on Black Monday , it fell in light trading, to 260.64. That triggered an all-out panic on Black Tuesday . By the end of the day, the Dow had fallen to 230.07, a 12 percent loss. After the crash, the Dow continued sliding for three more years. It finally bottomed on July 8, 1932, closing at 41.22. All told, it lost nearly 90 percent of its value since its high on September 3, 1929. In fact, it didn't reach that high again for 25 years, until November 23, 1954. Losses from the stock market crash helped create the Great Depression. What Caused It?

During the Roaring 20s , investing in the stock market became a national pastime. From 1922 until right before the crash, the stock market value increased by 218 percent, or almost 20 percent a year. Those who didn't have the cash to invest could borrow from their stockbroker "on margin." That meant they only had to put 10-20 percent down. The stories of everyone from maids to teachers making millions fueled irrational exuberance . Some banks even invested their depositors' savings without telling them. Their misuse of funds created the run on the banks that was a hallmark of the Great Depression . Banks didn't have enough to honor depositors' withdrawals. Many people only got ten cents for every dollar. That was one reason President Roosevelt created the Federal Deposit Insurance Corporation as part of the New Deal . There were some warning signals in the spring of 1929. The Dow dropped in March, but bankers reassured investors and restored confidence. Next, on August 8, the Federal Reserve Bank of New York increased the discount rate from 5 to 6 percent.

The Bank of England followed on September 26 to slow a loss of its gold reserves as a result of Wall Street investments. Like all other developed countries , England was on the gold standard . That meant it and had to honor any payments, if asked, with its value in gold. As interest rates rose, financing for stockbroker margin loans fell. On September 29, newspapers reported how Clarence Hatry's use of fraudulent collateral to buy United Steel. His company collapsed, and investors lost billions. That hammered the British stock market, making U.S. investors even more jittery. The next precipitating factor occurred on October 3, 1929. England's Chancellor of the Exchequer called America's stock market "a perfect orgy of speculation." On October 4, the Wall Street Journal and the New York Times agreed in editorials. U.S. Treasury Secretary of the Treasury Andrew Mellon said investors "acted as if the price of securities would infinitely advance." Media coverage of significant stock market declines on October 3, 4 and 16 added to the market's instability. On October 19 and 20, the Washington Post focused on a sell-off of utility stocks.

On Monday, October 21, the market went down again. On October 22, The New York Times blamed stock speculators for the previous day's losses. They named margin sellers, short-selling , and the disappearance of foreign investors. The next day, the market fell again.The next day, the market fell again. The Times headlines screamed "Prices of Stocks Crash in Heavy Liquidation." The press helped set the stage for Black Thursday. (Source: Harold Bierman, Jr, The 1929 Stock Market Crash .) Black Thursday and the 1929 Stock Market Crash Day Stock market crashes - Oct 29, 1929 - HISTORY.com Stock market crashes Publisher A+E Networks Black Tuesday hits Wall Street as investors trade 16,410,030 shares on the New York Stock Exchange in a single day. Billions of dollars were lost, wiping out thousands of investors, and stock tickers ran hours behind because the machinery could not handle the tremendous volume of trading. In the aftermath of Black Tuesday, America and the rest of the industrialized world spiraled downward into the Great Depression. During the 1920s, the U.S.

stock market underwent rapid expansion, reaching its peak in August 1929, a period of wild speculation. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value. Among the other causes of the eventual market collapse were low wages, the proliferation of debt, a weak agriculture, and an excess of large bank loans that could not be liquidated. Stock prices began to decline in September and early October 1929, and on October 18 the fall began. Panic set in, and on October 24—Black Thursday—a record 12,894,650 shares were traded. Investment companies and leading bankers attempted to stabilize the market by buying up great blocks of stock, producing a moderate rally on Friday. On Monday, however, the storm broke anew, and the market went into free fall. Black Monday was followed by Black Tuesday, in which stock prices collapsed completely. After October 29, 1929, stock prices had nowhere to go but up, so there was considerable recovery during succeeding weeks.

Overall, however, prices continued to drop as the United States slumped into the Great Depression, and by 1932 stocks were worth only about 20 percent of their value in the summer of 1929. The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom. By 1933, nearly half of America’s banks had failed, and unemployment was approaching 15 million people, or 30 percent of the workforce. It would take World War II, and the massive level of armaments production taken on by the United States, to finally bring the country out of the Depression after a decade of suffering. Related Videos The Stock Market Crash of 1929 | The Stock Market Crash of 1929 By Jesse Colombo (This article was written on July 17th, 2012) America’s Stock Market Crash of 1929 was a powerful market crash that started in October of 1929 after the Roaring Twenties economic “bubble boom” finally popped.

America experienced an era of great peace and prosperity during the 1920s. After World War I, the so-called “Roaring Twenties” economic and cultural boom was fueled by industrialization and the popularization of new technologies such as radio and the automobile. Air flight was becoming common as well. The Dow stock average soared throughout the Roaring Twenties and many investors aggressively purchased shares, comforted by the fact that stocks were thought to be extremely safe by most economists due to the country’s powerful economic boom. Investors soon purchased stocks on margin, which is the borrowing of stock for the purpose of gaining financial leverage. For every dollar invested, a margin user would borrow nine dollars worth of stock. The use of leverage meant that if a stock went up 1%, the investor would make 10%. Unfortunately, leverage also works the other way around and amplifies even minor losses. If a stock drops too much, a margin holder could lose all of their investment and possibly owe money to their broker as well. From 1921 to 1929, the Dow Jones rocketed from 60 to 400, creating many new millionaires.

Very soon, stock trading became America’s favorite pastime as investors jockeyed to make a quick killing. Investors mortgaged their homes and foolishly invested their life savings into hot stocks such as Ford and RCA. To the average investor, stocks were practically a sure thing. Few people actually studied the finances and underlying businesses of the companies that they invested in. Thousands of fraudulent companies were formed to hoodwink unsavvy investors. Most investors never even thought a crash was possible – in their minds, the stock market “always went up.” How the Stock Market Crash of 1929 Happened In 1929, the Federal Reserve raised interest rates several times in an attempt to cool the overheated economy and stock market. By October, a powerful bear market had commenced. On Thursday, October 24th 1929, a spate of panic selling occurred as investors began to realize that the stock boom was actually an over-inflated speculative bubble. Margin investors were being decimated as large numbers of stock investors tried to liquidate their shares to no avail. Millionaire margin investors went bankrupt almost instantly when the stock market crashed on October 28th and 29th.

During November of 1929, the Dow sank from 400 to 145. In just three days, over $5 billion worth of market capitalization had been erased from stocks that were trading on the New York Stock Exchange. By the end of the 1929 stock market crash, a staggering $16 billion worth of market capitalization had been lost from NYSE stocks. To make matters worse, many banks had invested their deposits in the stock market, causing these banks to lose their depositors’ savings as stocks plunged. Bank runs soon occurred when bank patrons tried to withdraw their savings from banks all at the same time. Major banks and brokerage firms became insolvent, adding more fuel to the stock market crash. The financial system was in shambles. Many bankrupt speculators, some who were once very affluent, committed suicide by jumping out of buildings. Even bank patrons who had not invested in shares became broke as $140 billion of depositor money disappeared and 10,000 banks failed. The 1929 stock market crash was beneficial for some speculators, however.

Jesse Livermore correctly predicted the crash and shorted stocks to profit from the decline, earning him over 100 million dollars. Joseph Kennedy, President John F. Kennedy’s father, sold his stocks before the 1929 stock market crash and kept millions of dollars of profit. Kennedy decided to sell his stocks because he overheard shoeshine boys and other novices speculating on stocks, leading him to believe that the stock market had been experiencing a speculative bubble. The stock market crash of 1929 led to a major economic crisis known as the Great Depression. The Depression lasted from approximately October 1929 until the late-1930’s. Mass poverty became common and many workers lost their jobs and were forced to live in shanty towns. Former millionaire businessmen were reduced to selling apples and pencils on street corners. One-third of Americans were living below the poverty line during the Great Depression. The Dow Jones finally surpassed its 1929 high, a full 26 years later in 1955. The Roaring Twenties and the stock market crash of 1929 was similar to any other speculative bubble and subsequent crash.

The classic pattern of extreme euphoria and irrational expectations will always lead to devastating financial crashes. Other Stock Market Crash of 1929 Resources: Stock Market Crash of October 1929 - Social Welfare History Project Stock Market Crash of October 1929 Stock Market Crash of October 1929 Photo: Public Domain In late October 1929 the stock market crashed, wiping out 40 percent of the paper values of common stock. When the stock market crashed in 1929, it didn’t happen on a single day. Instead, the stock market continued to plummet over the course of a few days setting in motion one of the most devastating periods in the history of the United States. The most significant events started on Black Thursday, October 24, 1929. On that day, nearly 13 million shares of stock were traded. It was a record number of stock trades for the U.S. J.P. Morgan and a few other bankers attempted to bail out the banking system using their own money. They were unsuccessful. Their move led to a slight increase in stock price on Saturday, October 26.

But over the weekend many investors lost faith in the stocks and decided to sell their shares. When the markets reopened on Monday, October 28, 1929, another record number of stocks were traded and the stock market declined more than 22%. The situation worsened yet again on the infamous Black Tuesday, October 29, 1929, when more than 16 million stocks were traded. The stock market ultimately lost $14 billion that day. The stock market crash crippled the American economy because not only had individual investors put their money into stocks, so did businesses. When the stock market crashed, businesses lost their money. Consumers also lost their money because many banks had invested their money without their permission or knowledge. Even after the stock market collapse, however, politicians and industry leaders continued to issue optimistic predictions for the nation’s economy. But the Depression deepened, confidence evaporated and many lost their life savings. By 1933 the value of stock on the New York Stock Exchange was less than a fifth of what it had been at its peak in 1929. Business houses closed their doors, factories shut down and banks failed. Farm income fell some 50 percent.

By 1932 approximately one out of every four Americans was unemployed. According to historian Arthur M. Schlesinger, Jr. the most critical reasons for this economic collapse can be summarized as: 1) Management’s disposition to maintain prices and inflate profits while holding down wages and raw material prices meant that workers and farmers were denied the benefits of increases in their own productivity. The consequence was the relative decline of mass purchasing power. As goods flowed out of the expanding capital plant in ever greater quantities, there was proportionately less and less cash in the hands of buyers to carry the goods off the market. The pattern of income distribution, in short, was incapable of long maintaining prosperity. 2) Seven years of fixed capital investment at high rates had “overbuilt” productive capacity (in terms of existing capacity to consume) and had thus saturated the economy. The slackening of the automotive and building industries was symptomatic. The existing rate of capital formation could not be sustained without different governmental policies – policies aimed not at helping those who had money to accumulate more but at transferring money from those who were letting it stagnate in savings to those who would spend it.

3) The sucking off into profits and dividends of the gains of technology meant the tendency to use excess money for speculation, transforming the Stock Exchange from a securities market into a gaming-house. 4) The stock market crash completed the debacle. After Black Thursday, what rule was safe except Sauve qui peut? And businessmen, in trying to save themselves, could only wreck their system; in trying to avoid the worst, they rendered the worst inevitable. By shattering confidence, the crash knocked out any hope of automatic recovery. 5) In sum, the federal government had encouraged tax policies that contributed to over-saving, monetary policies that were expansive when prices were rising and deflationary when prices began to fall, tariff policies that left foreign loans as the only prop for the export trade, and policies toward monopoly which fostered economic concentration, introduced rigidity into the markets and anaesthetized the price system. Representing the businessmen, the federal government had ignored the dangerous imbalance between farm and business income, between the increase in wages and the increase in productivity. Representing the financiers, it had ignored irresponsible practices in the securities market. Representing the bankers, it had ignored the weight of private debt and the profound structural weaknesses in the banking and financial system.

Seeing all problems from the viewpoint of business, it had mistaken the class interest for the national interest. The result was both class and national disaster. Source: Arthur M. Schlesinger, Jr. The Crisis of the Old Order, The Age of Roosevelt 1919-1933: Houghton Mifflin Company, 1957, pp. 159-160. For further information: “Sounds of the Crash” – On the 70th anniversary of the great stock market crash of October 29th, 1929, Marketplace presented an audio collage of music resulting from that event. Peter Stenshoel’s collage is announced by host, David Brancaccio. How to Cite this Article (APA Format): Social Welfare History Project. (2011). Stock Market Crash of October 1929. Social Welfare History Project. Retrieved [date accessed] from Brief History of The Crash of 1929 - TIME Follow @TIME Seventy-nine years ago this week, the New York Stock Exchange experienced the worst financial panic the country had ever seen.

There have been more crashes since  with bigger numbers and bigger losses  but nothing quite rivals the terror and devastation of Black Tuesday: October 29, 1929. When President Calvin Coolidge delivered his 1928 State of the Union address, he noted that America had never "met with a more pleasing prospect than that which appears at the present time." Americans had a lot to be proud of back then: World War I was thoroughly behind them, radio had been invented, and automobiles were growing cheaper and more popular. Sure, the disparity between the rich and the poor had widened within the past decade, but Americans could now buy goods on installment plans  a relatively new concept  and families could afford more than ever before. Stocks were on a tear: between 1924 and 1929, the Dow Jones Industrial Average quadrupled. At that time, it was the longest bull market ever recorded; some thought it would last forever. In the fall of 1929, economist Irving Fisher announced that "stock prices have reached what looks like a permanent plateau." ( See pictures of the stock market crash of 1929.

) Unsurprisingly, this exuberance lured more investors to the market, investing on margin with borrowed money. By 1929, 2 out of every 5 dollars a bank loaned were used to purchase stocks. The market peaked on September 3, 1929. Steel production was down, several banks had failed, and fewer homes were being built, but few paid attention  the Dow stood at 381.17, up 27% from the previous year. Over the next few weeks, however, prices began to move downward. And the lower they fell, the faster they picked up speed. In the last hour of trading on Thursday, Oct. 23, 1929, stock prices suddenly plummeted. When the closing bell rang at 3 p.m. people were shaken. No one was sure what had just happened, but that evening provided enough time for fear and panic to set in. When the market opened again the next day, prices plunged with renewed violence. Stock transactions in those days were printed on ticker tape, which could only produce 285 words a minute.

Thirteen million shares changed hands  the highest daily volume in the exchange's history at that point  and the tape didn't stop running until four hours after the market closed. The following day, President Herbert Hoover went on the radio to reassure the American people, saying "The fundamental business of the country...is on a sound and prosperous basis." And then came Black Monday. As soon as the opening bell rang on Oct. 28, prices began to drop. Huge blocks of shares changed hands, as previously impregnable companies like U.S. Steel and General Electric began to tumble. By the end of the day, the Dow had dropped 13%. So many shares changed hands that day that traders didn't have time to record them all. They worked into the night, sleeping in their offices or on the floor, trying to catch up to be ready for October 29. As the story goes, the opening bell was never heard on Black Tuesday because the shouts of "Sell! Sell! Sell!" drowned it out. In the first thirty minutes, 3 million shares changed hands and with them, another $2 million disappeared into thin air. Phone lines clogged. The volume of Western Union telegrams traveling across the country tripled.

The ticker tape ran so far behind the actual transactions that some traders simply let it run out. Trades happened so quickly that although people knew they were losing money, they didn't know how much. Rumors of investors jumping out of buildings spread through Wall Street; although they weren't true, they drove the prices down further. Brokers called in margins; if stockholders couldn't pay up, their stocks were sold, wiping out many an investor's life savings in an instant. So many trades were made  each recorded on a slip of paper  that traders didn't know where to store them, and ended up stuffing them into trash cans. One trader fainted from exhaustion, was revived and put back to work. Others got into fistfights. The New York Stock Exchange's board of governors considered closing the market, but decided against it, lest the move increase the panic. When the market closed at 3 p.m., more than 16.4 million shares had changed hands, using 15,000 miles of ticker tape paper. The Dow had dropped another 12%.

In total, $25 billion  some $319 billion in today's dollars  was lost in the 1929 crash. Stocks continued to fall over subsequent weeks, finally bottoming out on November 13, 1929. The market recovered for a few months and then slid again, gliding swiftly and steadily with the rest of the country into the Great Depression. Companies incurred huge layoffs, unemployment skyrocketed, wages plummeted and the economy went into a tailspin. While World War II helped pull the country out of a Depression by the early 1940s, the stock market wouldn't recover to its pre-crash numbers until 1954. Black Thursday Definition | Investopedia Black Thursday What was 'Black Thursday' Black Thursday is the name given to Thursday, Oct. 24, 1929, when the Dow Jones Industrial Average plunged 11% at the open in very heavy volume, precipitating the Wall Street crash of 1929 and the subsequent Great Depression of the 1930s.

More recently, "Black Thursday" is also used to refer to the Thanksgiving holiday in the United States, as more retailers open on Thanksgiving evening in a bid to get an early start on the frenzied shopping of Black Friday . BREAKING DOWN 'Black Thursday' Black Thursday and the consequent market crash of 1929 triggered a complete overhaul of market regulation of the U.S. securities industry. These events led to the promulgation of the Securities Act of 1933 and the Securities Exchange Act of 1934 . The shopping version of "Black Thursday" has led to growing resistance among employees of retailers, who complain that they are forced to leave Thanksgiving family dinners early in order to report to work on time. Many retailers are opening earlier on Black Thursday with every passing year in order to counter the increasing popularity of online sales. Trading Center Black Tuesday: Definition, Cause, Kickoff to Depression Black Tuesday: Definition, Cause, Kickoff to Depression Search the site Black Tuesday: Definition, Cause, Kickoff to Depression The Worst Day in Wall Street's History By Kimberly Amadeo Updated December 23, 2016 Definition: Black Tuesday was October 29, 1929.

Investors traded a record 16.4 million shares and lost $14 billion on the New York Stock Exchange . (That's $194 billion in 2016 dollars). It was the fourth and worst day in the stock market crash of 1929 . It was the worst day in the history of Wall Street. It started the Great Depression because it signaled a complete loss of confidence in the U.S. financial system. What Happened? The moment the opening bell rang, the Dow Jones Industrial Average fell 8 points to 252.6. Panicked sellers were shouting "Sell! Sell!" so loudly that no one heard the bell ring. In a half hour, they sold three million shares and lost $2 million. As the day wore on, the Dow fell to 212.33. The ticker tape that announced stock prices was hours behind. That meant investors didn't know how much they were losing. They frantically called their brokers. When they couldn't get through, they sent telegrams. Western Union said its volume tripled that day. Back then, traders physically wrote orders on pieces of paper. There were so many trades that the orders backed up.

Traders just stuffed them into trash cans. Fistfights broke out, and one trader collapsed. He was revived and put back to work. The NYSE board were afraid that they would worsen the panic if they closed the market. The prominent banks of the day tried to stop the crash. Morgan Bank , Chase National Bank, and National City Bank of New York bought shares of stock s. They wanted to restore confidence in the stock market . Instead, the intervention signaled the exact opposite. Investors saw it as a sign that the banks had panicked. When the market closed at 3 pm, it had lost 11 percent of its value, closing at 230.7. (Source: The Crash of 1929 , Time Magazine, October 29, 2008.) For more, see Timeline of the Great Depression . What Caused Black Tuesday? Part of the panic that caused Black Tuesday resulted from how investors played the stock market in the 1920s. They didn't have instant access to information like they do today. Stock prices weren't on the computer. Instead, they were shown via a ticker tape machine. This machine printed stock prices on a strip of paper.

As share prices dropped on Black Tuesday, panic ensued because no one knew how bad it was. That's because the ticker tapes literally could not keep up with the pace of falling stock prices. It was pandemonium on the floor of the stock exchange. Buyers roared and screamed. Some collapsed onto the ground when they got bad news about a stock price. Crowds formed outside of the New York Stock Exchange. The police were called to keep order. The other reason for the panic was the new method for buying stocks , called buying on margin . Investors could place huge stock orders with only 10 percent or 20 percent down. They used the money they borrowed from their brokers. When stock prices fell, the brokers called in the loans. Many people found their entire life savings wiped out to pay off the loan. Some of them realized what fools they had been. In despair, they jumped out of windows. The Roaring Twenties was over. New York hotel clerks would cynically ask their incoming guests, "You want a room for sleeping or for jumping?" Impact: How Black Tuesday Helped Cause the Great Depression Black Tuesday was the last day of the stock market crash.

During that time, the Dow dropped 25 percent, and investors lost $30 billion. That was ten times more than the 1929 Federal budget, and more than the United States had spent on World War I. Stock prices continued to fall. They hit their 1929 bottom on November 13. By then, more than $100 billion had disappeared from the American economy. In today's terms, that was worth $1.3 trillion. The Dow didn't regain its pre-crash high until November 23, 1954. Black Tuesday's losses weren't enough to cause the Great Depression . They did, however, destroy confidence in the economy. In those days, people believed the stock market was the economy. What was good for Wall Street was thought to be good for Main Street. That loss of confidence created a run on the banks. People withdrew all their savings. The banks didn't have enough cash on hand and were forced to close. When they reopened, they only gave savers ten cents for every dollar. There was no Federal Deposit Insurance Corporation to insure people's savings. Investors abandoned the stock market and started putting their money in commodities . Gold prices soared.

At that time, the U.S. was on the gold standard and promised to honor each dollar with its value in gold. As people began turning in dollars for gold, the U.S. government began to worry it would run out of gold. The Federal Reserve thought it would come to the rescue by increasing the value of the dollar . How did it do this? By raising interest rates , which reduced liquidity to businesses. Without funds to grow, companies started laying off employees. That created a vicious downward economic spiral that became the Great Depression. For more, see Effects of the Great Depression . Statistics The Stock Market Crash of 1929 When the stock market crashed in 1929, it didn’t happen on a single day. Instead, the stock market continued to plummet over the course of a few days setting in motion one of the most devastating periods in the history of the United States. Black Thursday The most significant events started on Black Thursday, October 24, 1929. On that day, nearly 13 million shares of stock were traded. It was a record number of stock trades for the U.S. and marked the end of an upward trend on stock prices.

On Black Thursday, the stock prices dropped so quickly, the stock ticker could not keep up. As the day progressed, the stock ticker lagged behind, failing to show the most up to date stock prices. Top American Bankers Try to Save the Banking System On the next day, Friday, October 25, several of the nation’s largest bankers met to decide what they could do about the situation. Among the attendees were the heads of Morgan Bank, Chase National Bank, and National City Bank. The bankers ultimately decided to purchase a number of U.S. Steel shares above market price. A similar tactic worked to end a previous stock market scare in 1907 when the New York Stock Exchange plummeted, causing many banks and businesses to file bankruptcy. American banker J.P. Morgan and a few other bankers bailed out the banking system using their own money. The bankers who tried to thwart the 1929 stock market crash were unsuccessful. There were positive results, but they were short lived. In those days, the stock market traded six days a week instead of five. The bankers’ move led to a slight increase in stock price on Saturday, October 26.

But over the weekend many investors lost faith in the stocks and decided to sell their shares. When the markets reopened on Monday, October 28, 1929, another record number of stocks were traded and the stock market declined more than 22%. The situation worsened yet again on the infamous Black Tuesday, October 29, 1929 when more than 16 million stocks were traded. The stock market ultimately lost $14 billion that day. What Caused the 1929 Stock Market Crash? In the years leading up to the stock market crash of 1929, the stock market had gained much popularity as a way of making money. Because stocks prices had been on the rise, they gained the reputation of being a safe way to invest. Many investors believed stocks were their ticket to riches. A great number of investors were purchasing stock on the margin, meaning they put 10% of the investment and borrow the remaining 90%. For example, if $10 worth of stock was purchased, the investor put in $1, while the mortgage broker put in the other $9. It was a good deal as long as stocks were gaining value.

However, if the stock lost value, the stockbroker would issue a margin call requiring the investor to pay back the loan. In the example above, not only did the investor lose the $1 he invested, he also had to pay back the $9 he’d borrowed. How Mass Trades Lowered Stock Prices All was well for most of the 1920s. People believed that stock values would never stop rising. But, in 1929, some of the larger investors realized the stock prices were artificially high as a result of the mass investments from speculative investors. So, those “savvy” investors started trading their stocks and consequently, stock prices began to fall. Then, brokers issued margin calls leading to further stock market drops. The situation peaked on Black Tuesday when the stock market completely crashed. Even after Black Tuesday, stock prices continued to fall until November 23, 1929 when there was a brief period of stabilization. Though it seemed like the worst had been seen, there was more decline to come. After that, the stock market continued to decline until it reached its lowest point on July 8, 1932.

Stock Market Crash of 1929 Updated February 26, 2016. What Was the Stock Market Crash of 1929? In the 1920s,many people felt that they could make a fortune from the stock market. Forgetting that the stock market was volatile, they invested their entire life savings. Others bought stocks on credit (margin). When the stock market took a dive on Black Tuesday, October 29, 1929, the country was unprepared. The economic devastation caused by the Stock Market Crash of 1929 was a key factor in beginning the Great Depression . Dates: October 29, 1929 Also Known As: The Great Wall Street Crash of 1929; Black Tuesday A Time of Optimism The end of World War I heralded a new era in the United States. It was an era of enthusiasm, confidence, and optimism. A time when inventions such as the airplane and radio made anything seem possible. A time when 19th century morals were set aside and flappers became the model of the new woman. A time when Prohibition renewed confidence in the productivity of the common man.

continue reading below our video The Stock Market Crash of 1929 It is in such times of optimism that people take their savings out from under their mattresses and out of banks and invest it. In the 1920s, many invested in the stock market. The Stock Market Boom Although the stock market has the reputation of being a risky investment, it did not appear that way in the 1920s. With the mood of the country exuberant, the stock market seemed an infallible investment in the future. As more people invested in the stock market, stock prices began to rise. This was first noticeable in 1925. Stock prices then bobbed up and down throughout 1925 and 1926, followed by a strong upward trend in 1927. The strong bull market (when prices are rising in the stock market) enticed even more people to invest. By 1928, a stock market boom had begun. The stock market boom changed the way investors viewed the stock market. No longer was the stock market for long-term investment.

Rather, in 1928, the stock market had become a place where everyday people truly believed that they could become rich. Interest in the stock market reached a fevered pitch. Stocks had become the talk of every town. Discussions about stocks could be heard everywhere, from parties to barber shops. As newspapers reported stories of ordinary people - like chauffeurs, maids, and teachers - making millions off the stock market, the fervor to buy stocks grew exponentially. Although an increasing number of people wanted to buy stocks, not everyone had the money to do so. Buying on Margin When someone did not have the money to pay the full price of stocks, they could buy stocks "on margin." Buying stocks on margin means that the buyer would put down some of his own money, but the rest he would borrow from a broker. In the 1920s, the buyer only had to put down 10 to 20 percent of his own money and thus borrowed 80 to 90 percent of the cost of the stock. Buying on margin could be very risky.

If the price of stock fell lower than the loan amount, the broker would likely issue a "margin call," which means that the buyer must come up with the cash to pay back his loan immediately. In the 1920s, many speculators (people who hoped to make a lot of money on the stock market) bought stocks on margin. Confident in what seemed a never-ending rise in prices, many of these speculators neglected to seriously consider the risk they were taking. Signs of Trouble By early 1929, people across the United States were scrambling to get into the stock market. The profits seemed so assured that even many companies placed money in the stock market. And even more problematically, some banks placed customers' money in the stock market (without their knowledge). With the stock market prices upward bound, everything seemed wonderful. When the great crash hit in October, these people were taken by surprise. However, there had been warning signs. On March 25, 1929, the stock market suffered a mini-crash. It was a prelude of what was to come. As prices began to drop, panic struck across the country as margin calls were issued.

When banker Charles Mitchell made an announcement that his bank would keep lending, his reassurance stopped the panic. Although Mitchell and others tried the tactic of reassurance again in October, it did not stop the big crash. By the spring of 1929, there were additional signs that the economy might be headed for a serious setback. Steel production went down; house construction slowed; and car sales waned. At this time, there were also a few reputable people warning of an impending, major crash; however, as month after month went by without one, those that advised caution were labeled pessimists and ignored. Summer Boom Both the mini-crash and the naysayers were nearly forgotten when the market surged ahead during the summer of 1929. From June through August, stock market prices reached their highest levels to date. To many, the continual increase of stocks seemed inevitable. When economist Irving Fisher stated, "Stock prices have reached what looks like a permanently high plateau," he was stating what many speculators wanted to believe. On September 3, 1929, the stock market reached its peak with the Dow Jones Industrial Average closing at 381.17. Two days later, the market started dropping.

At first, there was no massive drop. Stock prices fluctuated throughout September and into October until the massive drop on Black Thursday. Black Thursday - October 24, 1929 On the morning of Thursday, October 24, 1929, stock prices plummeted. Vast numbers of people were selling their stocks. Margin calls were sent out. People across the country watched the ticker as the numbers it spit out spelled their doom. The ticker was so overwhelmed that it quickly fell behind. A crowd gathered outside of the New York Stock Exchange on Wall Street , stunned at the downturn. Rumors circulated of people committing suicide. To the great relief of many, the panic subsided in the afternoon. When a group of bankers pooled their money and invested a large sum back into the stock market, their willingness to invest their own money in the stock market convinced others to stop selling. The morning had been shocking, but the recovery was amazing. By the end of the day, many people were again buying stocks at what they thought were bargain prices. On "Black Thursday," 12.9 million shares were sold - double the previous record. Four days later, the stock market fell again.

Black Monday - October 28, 1929 Although the market had closed on an upswing on Black Thursday, the low numbers of the ticker that day had shocked many speculators. Hoping to get out of the stock market before they lost everything (as they thought they had on Thursday morning), they decided to sell. This time, as the stock prices plummeted, no one came in to save it. Black Tuesday - October 29, 1929 October 29, 1929, "Black Tuesday," is known as the worst day in stock market history. There were so many orders to sell that the ticker quickly fell behind. (By the end of close, it had lagged to 2 1/2 hours behind.) People were in a panic; they couldn't get rid of their stocks fast enough. Since everyone was selling and nearly no one was buying, stock prices collapsed. Rather than the bankers rallying investors by buying more stocks, rumors circulated that they were selling. Panic hit the country. Over 16.4 million shares of stock were sold - a new record.

The Drop Continues Not sure how to stem the panic, the decision was made to close the stock market on Friday, November 1 for few days. When it reopened on Monday, November 4 for limited hours, stocks dropped again. The slump continued until November 23, 1929, when prices seemed to stabilize. However, this was not the end. Over the next two years, the stock market continued to drop. It reached its low point on July 8, 1932 when the Dow Jones Industrial Average closed at 41.22. Aftermath To say that the Stock Market Crash of 1929 devastated the economy is an understatement. Although reports of mass suicides in the aftermath of the crash were most likely exaggerations, many people lost their entire savings. Numerous companies were ruined. Faith in banks was destroyed. The Stock Market Crash of 1929 occurred at the beginning of the Great Depression . Whether it was a symptom of the impending depression or a direct cause of it is still hotly debated.

Historians, economists, and others continue to study the Stock Market Crash of 1929 in the hopes of discovering the secret to what started the boom and what instigated the panic. As of yet, there has been little agreement as to the causes. In the years after the crash, regulations covering buying stocks on margin and the roles of banks have added protections in the hopes that another severe crash could never happen again. CNN.com - October 29, 1929: 'Black Tuesday' - Mar. 10, 2003 October 29, 1929: 'Black Tuesday' The stock market was smaller in 1929, but its influence was still great. Story Tools (CNN) -- By modern-day standards, the U.S. stock market of 1929 was small. The Dow Jones Industrial Average numbered in the low hundreds then, with hundreds of billions of dollars -- compared with hundreds of trillions today -- wrapped up in the market. But what happened in three "black days" in autumn of 1929 was nothing minor.

After an initial downturn on October 24, called "Black Thursday," the market plummeted in two days of panic -- on October 28, "Black Monday," and October 29, "Black Tuesday," the day it completely collapsed. The Dow opened that day at 299.6, but crashed 68.9 points to close at 230.7, losing 23 percent of its value. The nation is marching along a permanently high plateau of prosperity. -- Yale economist Irving Fisher, five days before "Black Tuesday" TIMELINE

Question: The US Stock Market crash known as Black Thursday happened on 24 October of what year?
Answer: 1929