Stock Market Crash of 1929

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Stock Certificate.jpg
Stock certificate for 30 shares in Market Exchange and Holding Corporation, issued May 18, 1929. The shares were held by Mrs. Marjorie Phillippi.

During the late 1920s, the stock market in the United States boomed. Millions of Americans began to purchase stock, causing the market to dramatically increase in value. Unfortunately for the economy, so many Americans invested money in the stock market that stocks became inflated in price. In essence, stocks were selling for more money than they were worth. In 1924, the New York Times index of the leading twenty-five industrial stocks topped the one hundred point mark. By the beginning of 1928, these same stocks had topped 245 points, more than doubling the stocks' price. The market continued to soar during 1928 and much of 1929, with these twenty-five leading industrial stocks reaching the 452 point mark in early September 1929, almost doubling the stocks' selling price in less than two years.

One of the principal reasons for the skyrocketing prices was the fact that many Americans, more than ever before, began to purchase stocks. As stocks climbed in price, many Americans believed that they could amass a tremendous fortune, even if they owned only one or two shares of stock. Unfortunately for many potential investors, these people did not have enough money to afford shares of stock. Because of their limited capital, many investors purchased stock on credit. As long as the stock market continued to increase in value, these investors did stand to make a profit. Unfortunately for them, beginning in September 1929, the stock market began to decline in value as larger investors realized that the stocks were inflated in price. On October 23, the stock market lost thirty-one points, approximately seven percent of its value. Conditions worsened the next day. By mid-November, the twenty-five leading industrial stocks had dropped to 224 points, less than one-half of their value two months earlier. The market continued to decline in value, leaving investors who had purchased stock on credit financially destroyed. Faced with financial ruin, some investors actually committed suicide, believing that they would never be able to escape from their debts.

This quick and precipitous decline in stocks' value in October 1929 became known as the Stock Market Crash of 1929. This event signaled the beginning of the Great Depression. During this economic downturn, millions of American workers lost their jobs. Industrial and construction workers faced some of the greatest hardships during this period. In Ohio, by 1933, more than forty percent of factory workers and sixty-seven percent of construction workers were unemployed. Farmers faced low prices for their products, and many consumers could still not afford to purchase the farmers' items, resulting in farm foreclosures across the United States. The apparent economic boom of the 1920s came to an abrupt halt in October 1929, as businesses and consumers had over extended themselves financially. The result was the Stock Market Crash of 1929 and the Great Depression.

See Also