Stock market crash of 1929

Definition

The stock market crash of 1929 was a dramatic decline in stock prices that occurred in late October 1929, marking the beginning of the Great Depression. It was characterized by widespread panic selling as investors lost confidence, leading to a rapid loss of wealth and triggering economic turmoil. This event played a crucial role in the economic boom and consumerism of the 1920s, revealing the fragility of the economic system and setting the stage for massive unemployment and hardship.

5 Must Know Facts For Your Next Test

1. The crash began on October 24, 1929, known as Black Thursday, when panic selling started to take hold, but it reached its peak on Black Tuesday, October 29.
2. During the crash, approximately $30 billion in market value was lost in just a few days, which would be equivalent to about $400 billion today.
3. The crash undermined consumer confidence and led to reduced spending, contributing significantly to the onset of the Great Depression.
4. Many banks failed as a result of the stock market crash since they had invested heavily in stocks, leading to widespread bank closures and loss of savings.
5. The event highlighted the dangers of unchecked speculation and prompted calls for regulatory reforms in the financial sector to prevent such occurrences in the future.

Review Questions

• How did the stock market crash of 1929 reflect the economic conditions of the late 1920s?
  • The stock market crash of 1929 illustrated the precarious nature of the economic boom during the late 1920s. With rising stock prices fueled by rampant speculation and consumer optimism, many investors assumed that growth would continue indefinitely. However, when prices began to fall sharply, panic ensued, causing widespread sell-offs and revealing how unsustainable and fragile this economic growth truly was.
• Discuss the immediate effects of the stock market crash on American society and its economy.
  • The immediate effects of the stock market crash were devastating for American society and the economy. Millions lost their life savings as banks failed or closed, which led to a sharp decline in consumer spending and investment. Unemployment skyrocketed as businesses collapsed under financial strain, setting off a chain reaction that resulted in widespread poverty and despair across the nation.
• Evaluate how Hoover's response to the stock market crash influenced public perception and trust in government during the early years of the Great Depression.
  • Hoover's response to the stock market crash was seen as inadequate by many Americans, which significantly influenced public perception and trust in government. His belief in limited government intervention led him to favor voluntary measures and private charities over direct federal assistance. As conditions worsened without effective federal relief, people grew increasingly frustrated with Hoover's policies. This dissatisfaction contributed to a shift in public sentiment towards seeking more proactive government solutions under future administrations.

Related terms

Black Tuesday: October 29, 1929, the day when stock prices plummeted dramatically, leading to a massive sell-off and signifying the most devastating stock market crash in U.S. history.

Great Depression:

A severe worldwide economic downturn that lasted from 1929 until the late 1930s, marked by high unemployment rates and significant declines in industrial output.

speculation: The practice of buying stocks with the hope that they will increase in value; during the 1920s, excessive speculation contributed to inflated stock prices and ultimately to the crash.