Investors lost billions of dollars as millions of shares plummeted in value and even became worthless. On “Black Tuesday,” 16 million shares were traded on the New York Stock Exchange. The fall slowed on Monday, but then on Tuesday, October 29, 1929, the bottom fell out of the market. On Friday, President Herbert Hoover tried to stop the panic by assuring Americans that the business of the country was “on a sound and prosperous basis,” but neither his words nor the attempts by some of the big banks and major investors to shore up the value of stocks by purchasing them at artificially higher prices had any effect on stemming the tide of stock selling. October 24 was quickly given the name “Black Thursday.” The technology of the time – telephone, telegraph, and ticker tape – was not able to keep up with the pace of trading, and many investors did not learn of their losses until late that evening. The market had taken a nose dive, and investors found themselves in the dark as their paper fortunes began to dwindle or disappear. However, on Thursday, October 24, a selling panic began and 13 million shares were traded, which far surpassed the average of four million shares per day the preceding month. The fluctuations seemed relatively normal because the market often went up and down.
It was a high not born of drugs but of an illusion that the prosperity and the good times then being enjoyed were made of new miracle ingredient that would last forever.”įollowing that peak, stock prices fell by approximately 10 percent during September but then rose again by about 8 percent by the middle of October. He wrote: “In the summer of 1929 much of America was on an artificial high. Among other things, this was the moment when Americans started drinking sauerkraut juice for no apparent reason – a fact noted by Maury Klein in his definitive narrative on the history of the Crash. There was a madness in the air that seemed hard to explain. It also marked the end of what later became known as the “summer of fun,” when an epidemic of dance marathons, flagpole-sitting contests, and other zany fads seemed to have taken hold of the country. The market high of September 3, 1929, came the day after the end of the long Labor Day weekend. The interior of the New York Stock Exchange, pictured here in 1920, where thousands of stocks were traded daily using telephone booths scattered throughout the trading floor. But if your stock went down in value, the broker would demand more and more of the loan to be paid in cash to cover the loss.
To many, buying stocks on margin was easy money and a way to get rich quick. Investors at that time did not seem to care all that much, however, because they were making money. That $75 profit existed only on paper, because you still had to pay back the bank or broker who loaned you the $900 at a rate somewhere in the neighborhood of 14 to 19 percent. If your $1,000 in stocks then rose in value to $1,075, you made $75 on your $100 investment when you sold the stock – or so it seemed. Under the loose rules of the time, they could purchase a stock by simply laying down 10 percent of its cost and borrowing the rest from banks or stockbrokers – buying, for example, $1,000 worth of a stock and handing over just $100 in cash. Unlike wealthy investors, however, many of modest means poured their life savings into stocks using borrowed money, known as buying shares “on margin.”īuying stocks on margin brought hundreds of thousands of new investors into the market.
#STOCK CRACK OF 1929 DRIVERS#
This rise followed a period of wild speculation during which Americans ranging from millionaires to clerks and cab drivers were buying stocks (shares of ownership in a firm). In the United States during the prosperous “roaring 20s,” the stock market underwent rapid and unprecedented expansion, reaching its peak value on September 3, 1929. Use this Narrative with The Bonus Army Decision Point and the Should Herbert Hoover Be Considered an Activist President? Point-Counterpoint to have students explore the effect the Great Depression had on Americans in the 1920s and 1930s.
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