Fondos.Net - “The Crash of 1929”

“The Crash of 1929”

The Wall Street Crash that happened on October 24, 1929, preceded the Great Depression. All both events have had devastating effects on the country’s economy, that they are spelled and remembered in capital letters.

Near the end of the 1920s’ millions of Americans felt that the stock market was the place to put their funds in. To this end, they invested heavily by buying many stocks.

These investments artificially drove up the stock prices, and with the rising prices, more people invested, hoping the shares would rise further.

The investors heavily borrowed from the banks, to fund their investments. This cycle created an economic bubble, which was just waiting to burst.

Burst it did on October 24, 1929, and in the ensuing chaos, as much as twelve million shares of stocks were unloaded on the market, in one day. These shares became worthless and as the days went on, millions more shares were unloaded. Totally ruining the savings funds of millions of investors.

As for the banks that had financed the buying spree, they found themselves left with investor debts and had to declare bankruptcy during this period.

The business sector also suffered for they lost their credit lines and has to close – causing the unemployment lines to grow longer.

By the end of November 1929 – the markets had sustained a loss of $100 billion in assets. The decline of the stock market finally ended in July of 1932 with the Dow at 41.22, down 89.2%. The stock market would take twenty-two years, to recover.

The Crash of 1929 holds the world’s longest record of recovering.

The passage of the Smoot-Hawley Tariff Act, in June 1930, was for many economists and historians, the clincher act the national government made which contributed to continuance of the Great Depression.

This legislative act was originally intended to increase protect domestic farmers against foreign agricultural imports. However, what it did, to raise U.S. tariff rates to very high levels. It led to a big decline of foreign trade, at a time when it these trading activities could have helped the country out of the Depression. Not to mention the fact, that it did not engender trust or cooperation with the other countries.

But the stock exchange market has learned from this disaster. It has placed measures to prevent the stock market from falling. For instance, when there is a 10% drop in the Dow before 2 p.m., a one-hour halt in trading is made and so on. This will is to give the markets time to recover.

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