Wall Street crash of 1929

In the last week of October 1929, panic selling on the New York Stock Exchange brought a decade-long boom in American share prices to a sudden end. The worst days, Black Thursday on 24 October and Black Monday and Black Tuesday on 28 and 29 October, wiped out vast sums and shattered public confidence in banks and markets. By the time prices hit bottom in 1932, shares had lost almost 90 per cent of their peak value, and the crash had become the defining symbol of the Great Depression.

The years after World War I brought rapid industrial growth to the United States, and much of the new wealth flowed into speculation. Millions of ordinary people, unhappy with the low interest paid on bank deposits, put their savings into shares, often with borrowed money. By August 1929 it was common for brokers to advance small investors over two-thirds of what their shares cost, and loans to buy shares exceeded $8.5 billion, more than all the currency then in circulation. The Dow Jones Industrial Average rose roughly tenfold over nine years, peaking at 381.17 on 3 September 1929.

Beneath the surface, the economy was weakening. Farmers struggled with overproduction and falling prices, steel output and car sales were slipping, construction had slowed, and consumers had run up large debts. A small crash in March 1929 was halted when the banker Charles E. Mitchell pledged credit to support the market. In early September, the forecaster Roger Babson warned that a crash was coming, and prices began to fall, a dip many investors at first treated as a chance to buy.

A sharp fall on the afternoon of 23 October set off a wave of selling the next morning. On 24 October the market lost 11 per cent at the opening bell, and a record 12.9 million shares changed hands. Leading bankers, among them Thomas Lamont of the Morgan bank, Albert Wiggin of Chase and Mitchell of National City Bank, met and sent the exchange's vice-president, Richard Whitney, onto the floor to bid well above market price for U.S. Steel and other leading shares. The tactic, borrowed from the Panic of 1907, worked for the day, and the Dow closed only about 2 per cent lower.

The relief did not last. On 28 October investors facing demands to repay their loans sold heavily, and the Dow fell nearly 13 per cent. The next day around 16 million shares were traded and some stocks found no buyers at any price; the index lost almost 12 per cent more. Over the two days the Dow fell 23 per cent, still the worst two-day decline in its history.

After a brief rebound and a rally that lasted into April 1930, prices fell steadily for more than two years. On 8 July 1932 the Dow closed at 41.22, about 89 per cent below its 1929 peak and its lowest level of the twentieth century. It did not regain its 1929 high until November 1954.

Historians and economists still debate how far the crash caused the Great Depression. Only about 16 per cent of American households owned shares, and other problems, including Federal Reserve policy and a weak farm sector, played large roles. But the crash destroyed wealth, depressed spending and investment, and damaged confidence in the banks. Thousands of banks failed in the following years, unemployment soared, and the shock spread quickly to Europe.

In response, the Senate set up the Pecora investigation in 1932 to examine the causes of the crash, and Congress then passed the Glass–Steagall Act of 1933, separating commercial from investment banking, along with securities laws in 1933 and 1934 that created the Securities and Exchange Commission. Together with the economic programmes of the New Deal, they reshaped American finance.

Our 1930 map shows the world in the months after the crash, with the United States at the centre of the financial collapse that soon spread abroad.