The stock market crash of 1929 was a massive crash in stock prices on the New York Stock Exchange, and marks the largest financial crash in the United States

The stock market crash came in multiple parts – the initial crash on October 28 (a 12.87% drop) continued into October 29 (a 11.73% drop), but prices continued to decline until 1932, with a total loss of 89%. The crash marked the start of, and is one of the major causes of, the Great Depression.

Initially, some of the most wealthy bankers and industrialists tried to halt the crash by buying up millions of dollars in stocks themselves to try to boost prices. On the first day of the crash, the heads of several of the biggest banks in New York pooled their resources to buy huge amounts of US Steel (Stock Symbol: X) and other Blue Chip stocks. After this gesture, the panic began to subside and prices stopped dropping for the day.

However, the next morning prices resumed their fall, and further huge purchases by the Rockefeller family, and many others, were unable to restore investor confidence. Many people had been using stocks as collateral for loans they had taken out at banks – when the stock value dropped, the banks would often ask people and businesses to repay their loans, causing a massive wave of bankruptcies. This is how the crash in stock prices spread to the economy as a whole.

Causes Of The Stock Market Crash

There are several main causes of the 1929 stock market crash, ranging from wheat farmers through investment bankers and all points in between.

After World War One, millions of Americans began moving to the cities looking for work, and a new middle class began to emerge from the prosperity that followed the end of the war. This new group of people wanted effective ways to save their money and secure a more profitable return than simply keeping it in a savings account. Generally speaking, they chose to invest in stocks.

Today, this would not be much of an issue, but before the 20th century most investing was in bonds. The transition to stock trading came about because of railroad companies and new industrial companies. This new middle class was also buying cars and houses, which was good for business for steel and construction companies. This made their stock price rise.