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. 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.ģ) 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.Ĥ) The stock market crash completed the debacle. The slackening of the automotive and building industries was symptomatic. The pattern of income distribution, in short, was incapable of long maintaining prosperity.Ģ) 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. 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 consequence was the relative decline of mass purchasing power. the most critical reasons for this economic collapse can be summarized as:ġ) 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. Farm income fell some 50 percent. By 1932 approximately one out of every four Americans was unemployed.Īccording to historian Arthur M. Business houses closed their doors, factories shut down and banks failed. 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. But the Depression deepened, confidence evaporated and many lost their life savings. Consumers also lost their money because many banks had invested their money without their permission or knowledge.Įven after the stock market collapse, however, politicians and industry leaders continued to issue optimistic predictions for the nation’s economy. When the stock market crashed, businesses lost their money. The stock market crash crippled the American economy because not only had individual investors put their money into stocks, so did businesses. The stock market ultimately lost $14 billion that day. The situation worsened yet again on the infamous Black Tuesday, October 29, 1929, when more than 16 million stocks were traded. When the markets reopened on Monday, October 28, 1929, another record number of stocks were traded and the stock market declined more than 22%. But over the weekend many investors lost faith in the stocks and decided to sell their shares. Their move led to a slight increase in stock price on Saturday, October 26. Morgan and a few other bankers attempted to bail out the banking system using their own money. It was a record number of stock trades for the U.S. On that day, nearly 13 million shares of stock were traded. The most significant events started on Black Thursday, October 24, 1929. 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. When the stock market crashed in 1929, it didn’t happen on a single day. In late October 1929 the stock market crashed, wiping out 40 percent of the paper values of common stock. In: Eras in Social Welfare History, Great Depression Stock Market Crash of October 1929Ī solemn crowd gathers outside the Stock Exchange after the crash.
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