The Wall Street Crash

Setting the scene

The 1920s saw a massive stock market boom in America, with the Dow Jones rising from 63 in 1921 to 381 in 1929. Ordinary Americans bought stocks on margin—putting down 10% and borrowing the rest—creating a speculative bubble. Radio Corporation of America rose from $1.50 to $114 without paying dividends. Economists and bankers warned of overvaluation, but the Federal Reserve kept interest rates low. By 1929, 1.5 million Americans owned stocks, many using life savings.

What happened

On Thursday, October 24, 1929—Black Thursday—the market dropped 11% at the open, with 12.9 million shares traded. Bankers pooled $240 million to buy stocks and stabilized prices temporarily. But on Monday, October 28, the Dow fell 13%, and on Tuesday, October 29—Black Tuesday—it crashed 12% more on 16.4 million shares, losing $14 billion in value. Panicked investors sold everything. The ticker tape ran hours behind. Crowds gathered outside the New York Stock Exchange, though the myth of mass suicides is largely false.

Why it still matters

The crash didn't cause the Great Depression alone—bank failures, the gold standard, and the Smoot-Hawley Tariff deepened it—but it shattered confidence and wiped out wealth. The Dow didn't recover to 1929 levels until 1954, 25 years later. It led to the Securities Act of 1933, the SEC in 1934, and banking reforms. The crash ended the Roaring Twenties and began a decade of 25% unemployment, breadlines, and the Dust Bowl. It discredited laissez-faire economics and paved the way for Franklin Roosevelt's New Deal and Keynesian economics.

Background

The downturn spread globally during the Great Depression.