Stock Market Crash of 1929: The Week that Broke the American Economy

The Causes, Consequences, and Solutions to the Stock Market Crash of 1929

On Thursday, October 24th, 1929, thousands of New Yorkers anxiously scuttled into the New York Stock Exchange hours before the trading had even begun. People from all walks of life wanted an opportunity to make a profit off of the bull market. Little did they know that the money they poured into the stock market would be lost forever and their lives irreversibly changed for the worse.

The stock market crash of 1929, which occurred during the last week in October, was a series of days in which the stock market plummeted in a chain reaction, ruining many companies, banks, and investors. Although it is not entirely clear what exactly caused this disaster, many economists agree on the Boom-bust theory to explain what happened. Whatever caused the crash, its consequences affected American consumption, banking, and the economy in general. The disaster was tragically predictable, and President Hoover responded cautiously at first. However, Hoover's successor, President Roosevelt, quickly and vigorously tried to restore confidence, fix the economy, and prevent another financial catastrophe.

For the past seventy-seven years, economists have been trying to understand exactly what led to the Great Crash. One popular theory, called the Boom-bust theory, explains the disaster by describing the stock market as a bubble. Near the end of the "Roaring Twenties," speculation in the stock market became dangerously common. More people bought stock and, based on the rising stock prices, their investments seemed secure. This only encouraged Americans to buy even more stocks, using their money as well as loans from banks. Rising stock prices, widespread speculation, and margin buying all led to the creation of a stock market bubble.