Stock Market Crash Of 1929
The rise in stock market and the ease with which banks doled out loans and debts in the start of 1920s lead to a sudden increase in the credit based investments in the stock market. Economists and the general public at that time firmly believed that the market was only going to get better and better, that there was no stopping the rise. The speculative nature of the, “general investing public”, lead to tremendous increase in stock investments over a period of one decade. However, on October 29, 1929 which later on came to be known as “Black Tuesday” and the “Stock Market Crash of 1929”, this speculative bubble finally burst.
Starting in October 1929, over a period of one week, nearly $30 billion dollars were lost. The market kept going further down until it stagnated after a month at a low that predated the 20th century. The stock market crash of 1929, many hold responsible for the start of the great depression, which lasted at least for another decade all over the world. This assumption was partly true since, the pace and the intensity of the crash almost instantaneously crippled many financial institutions and resulted in directly affecting stable and prospering industries. With a dearth in liquidity, growth faltered and interest rates soared. Many other wise stable ventures crashed and burned along with the markets.
Today, many financial experts and analysts agree that the stock market crash of 1929 happened because of the two reasons namely, the speculative nature of the public and short selling. Brokerage firms were giving about an average of 66% margin to investors to buy stocks which meant that most shares were purchased using huge amounts of loans rather than cash. Secondly, with the start of the bear market, short sellers went on a rampage reducing the price of shares even further in an effort to buy them at the cheapest.
One interesting trivia about this dark period was that the Japanese market was the lone world market that did not fall.
