Nov 14, 2010

Wall Street Crash October 29th 1929

Wall Street Crash begins on October 24 "Black Thursday" and continued through October 29, 1929 "Black Tuesday" shares fall by 75%

Wall Street Crash : It started on October 24 "Black Thursday" and continued through October 29, 1929 "Black Tuesday", when share prices on the New York Stock Exchange (NYSE) collapsed. Shares fell over the 1930's by 75% and it was not until 1954 that shares rose back to the values of 1929 pre-crash.
What were the Causes : The causes were mostly from very high rising share prices which encouraged more people to invest, earlier in 1929 people were borrowing from banks hoping to be able to buy shares and resell at a large enough profit to pay back the loans and make a tidy profit.

What were the Long term Effects : The crash was the start of the great depression across America and the rest of the world many people lost homes, jobs, businesses, and life savings. It was not the only cause of the great depression but could be considered a major trigger, during the booming 20's many people lived beyond their means by borrowing credit for automobiles and furniture and a new lifestyle .
As heavy manufacturing was decimated with no consumers to buy, only after governments around the world put measures in place to put people back to work did things turn round. In America Roosevelt used 3 times the amount of GDP to boost public spending and put more people back to work some of the largest projects undertaken created many thousands of jobs. Roosevelt embarked on an antidote to the depression, launched a $5 billion spending program in the spring of 1938, Between 1933 and 1939, federal expenditure tripled, funded primarily by a growth in the national debt.
What did world Governments and Economists Learn : Economists are much quicker at spotting large increases in consumer spending and borrowing and often use the increase of interest rates to dampen spending habits, also if large drops occur in share prices or currency fluctuations the stock markets can be closed early to provide a breathing space for people to reflect prior to a panic situation, this also provides the government time to look at problems and react.
Could it all happen again : Yes it could all happen again but as it is in most government and the financial industry to prevent it , we hope it will not. We have seen a couple of instances over the last few years where a Government has increased the interest rates much higher very quickly which causes pain to consumers and businesses, but has so far managed to cause a slowdown in the economy in a controlled manner but stopped a complete meltdown, we can only hope this continues to work.

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