How did the stock market crash during the Great Depression?

Question

this is the only question i cant find the answer to please help!!!!!!!

Answer 1

The economy had been growing robustly for most of the so-called Roaring Twenties. It was a technological golden age as innovations such as radio, automobiles, aviation, telephony and the power grid were deployed and adopted. Companies who had pioneered these advances like Radio Corporation of America (RCA), and General Motors saw their stocks soar. Financial corporations also did well as Wall Street bankers floated mutual fund companies (then known as investment trusts) like the Goldman Sachs Trading Corporation. Investors were infatuated with the returns available in the stock market especially with the use of leverage through margin debt. On August 24, 1921, the Dow Jones Industrials Average stood at 63.9. By September 3, 1929, it had risen more than sixfold, touching 381.2. It would not regain this level for another twenty five years. Even during the summer of that year it was clear that the economy was contracting and the stock market soon went through a series of unsettling price declines in early October. These declines fed investor anxiety and events soon came to a head. October 24 (known as Black Thursday) was the first in a number of increasingly shocking market drops. This was followed swiftly by Black Monday on October 28 and Black Tuesday on October 29.

On Black Monday, the Dow Jones Industrial Average fell a startling 38 points to 260, a drop of 12.8%. The deluge of selling overwhelmed the ticker tape system that normally gave investors the current prices of their shares. Telephone lines and telegraphs were clogged and were unable to cope. This information vacuum only led to more fear and panic. The technology of the New Era much celebrated by investors previously, now served to deepen their suffering.

Black Tuesday was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The glamour stocks of the age saw their values decimated. Radio Corporation plunged from $40.25 to $26 in the first two hours of trading (down $75 from its historic peak). The Goldman Sachs Trading Corporation opened at 60 and closed at 35. The First National Bank of New York declined from $5200 to $1600. [1]Across the two days, the Dow Jones Industrial Average fell 23%.

By the end of the week of November 11, the index stood at 228, a cumulative drop of 40 percent from the September high. The markets rallied in succeeding months but it would be a cruel false recovery that led unsuspecting investors into the worst economic crisis of modern times.

It is popularly believed that it was the Crash that inflicted the heaviest financial loss on investors during the Twenties and Thirties. But the Great Depression which followed was far more terrible. While the Crash dealt a severe blow to many a stockholder's portfolio, the Great Depression brought obliteration and bankruptcy. Before it was over, the Dow Jones Industrial Average would lose 89% of its value before finally bottoming out in July 1932.

Answer 2

First of all, the stock market did not crash during the Great Depression. It crashed, causing the great depression. There were a great many causes but you can probably read about it in This Fabulous Century 1920-1930 edition Time Life. I think that everybody who could was playing the market with options that had nothing behind them. Many down turns in the economy caused the options to be called and the market collapsed.

You really need to read about that period so that you grasp it for yourself. Google October 24, 1929--see what you come up with.

Answer 3

It didn't crash during the Great Depression--its crash precipitated the Great Depression. Basically, the economy was contracting, but people were buying stocks "on the margin" which meant they would pay for stocks later. The idea was that the price of the stocks purchased would rise-the investor could then sell the stocks, pay for them, and wind up with a profit. When stock prices started to fall, payment for stocks purchased on the margin was demanded--people didn't have the money, and started liquidating other stocks so that they could cover their margins. More at the link.

My great-grandmother lost money in the stock market in 1929 and told me never to trust an investment broker or invest in the market.

Answer 4

It happened in Oct, 1929, many people consider it as a starting point of the Great Depression tho in truth unemployment and bankruptcies had been rising, the Crash just set off a general panic, a general public recognition that the economy was very very sick. There are no doubt figures available about the size of the loss that one day, by today's standards it was actually quite small, I think the Dow Jones lost something like 24 points that day, but at the time that was a very large fraction of the DJ's total value--something like a quarter of the value of stocks. But like I said, those exact figures are probably available on Google. It was set in motion by Margin Calls--people bought stocks on credit on the assumption they would rise. If the stocks rose, they had pure profit because the cost of their purchase was covered by the price increase. But when the prices declined, the buyers still had to pay for their purchases, and they couldn't. It was a downward cascade--the lower prices went, the lower they were forced to go.

Answer 5

The US Stock Market was unregulated and it was only controlled by GREED. People payed for Stocks with Loaned Money and When it crashed people lost more money then the lost cost of the stocks but the money that was invested into them.

Answer 6

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Answer 7

there was very little regulation on the issue of stocks. The banks held little reserves. When it came to light that some stocks were "bogus" the public lost faith in the market system and pulled what was left from declining values, creating a downward spiral in overall values.

Answer 8

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Answer 9

It was depressed, it got drunk and it crashed. I can relate.

Answer 10

Did you go to the library? If we can find the answer in seconds online--- so can you!