Month: August 2017

What Caused The 1929 Stock Market Crash?

October 24, 1929, marked the biggest stock market crash in the history of the United States. It has since been referred to as the Wall Street Crash of 1929 or Black Tuesday. It caused devastating effects which prompted the 12-year Great Depression.

A month before the event, the London Stock Exchange had experienced a crash as well. There was a boom in the market during the later half of the 1920s. Many already speculated the boom, explaining that a collision was only a matter of time. At this time, retail turnover, building construction, and steel production were breaking records consistently. Iron and steel saw their value increase twofold. This compelled many investors to put their money into the stock market, with a good number of them borrowing money just to have something to get started with.

New investors were hoping that prices would increase further. Ultimately, this led to an economic bubble. Historically, however, the stock market had been sensitive to the state of the commodity market. 1929 opened with an oversupply of wheat, thanks to the right harvests the previous year. This caused wheat prices to increase dramatically, which consequently led to a slight dip in the stock market. Thanks to other countries’ need for grain, the excess supply by the US was exported, driving prices down.

By August 1929, the countries that benefited from the oversupply of wheat started to experience better harvests. This caused stock prices to plummet in a snap. Amateur investors and speculators tried to take advantage of the opportunity, thinking that prices would increase again. This time, however, stock prices remained flat.

The 1929 stock market crash and the Great Depression were the biggest financial crisis of the 20th century. The effects were felt far and wide and lasted for more than a decade.

Content Provider- Stony