The Stock Market Collapse of 1929
and the Rise of Fake Money
By Ralph Blumenthal
It was a Tuesday, exactly 90 years ago
on October 29. Wall Street was thronged
with pulsing crowds, giving off an omi-
nous roar. The air was electric with panic.
The market opened in free fall. Unpro-
cessed sell orders overflowed the waste-
baskets. Ashtrays were filled with half-
smoked cigarettes. A record 16½ million
shares were traded—almost four million
more than the previous record, set the
prior Thursday, a one-day loss of value, in
today’s dollars, of nearly $208 billion.
But as bad as the day was, the Crash was
a process, a succession of wild swings that
turned sharply negative on Thursday, Octo-
ber 24, 1929, when panicked sellers sold off
nearly 13 million shares, sending the Dow
(expanded the year before to an index of 30
leading stocks, from 12) diving 11%.
Stocks bounced back, but the following
Monday they plunged again, and the next
day, Black Tuesday, the bottom fell out.
The four days of trading had cost investors
$30 billion—in today’s money nearly half
a trillion dollars, and almost 10 times
more than the entire 1929 federal budget.
By November, the equivalent of $1.5 tril-
lion had disappeared from the economy.
The Dow had hit its record high of 381 in
September 1929, up six-fold since 1921. By
the summer of 1932, it was down to almost
41, having lost nearly 90% of its value. By
1933 nearly 13 million Americans, almost
a quarter of the labor force, were jobless.
Wall Street had seen trouble before.
Notably the Panic of 1907 and the 1920
bombing outside JP Morgan & Co. that
killed 38 people and injured more than
300. But those disasters came and went.
The Crash of ’29 was different. It seemed
prolonged and endless and all but took the
country down with it.
In reality, there were many market
downs and ups before and after the Crash.
Even after the shock of Black Tuesday,
the plunge of prices halted by spring 1930,
and in April the Dow was 50% above its
November low. In June 1930, President
Herbert Hoover told a delegation of wor-
ried clergy, “You have come 60 days too
late. The depression is over.”
But of course it was only beginning.
The roots of the 1929 disaster were deep.
There had been a recession after World
War I. Inventories built up during the war
failed to find a market overseas, leading
to a drop in exports. Farm prices were
particularly hard hit. In ravaged Europe,
conditions were worse. Defeated Germany
suffered a catastrophic inflation that paved
the way for Hitler. But in the United
States, the long-term problems were hard
to see behind what became known, after
the death of Warren Harding in 1923, as
“the Coolidge boom.”
It was fueled by several things. The
Federal Reserve System, created in 1913,
began reducing its discount rate, from 7%
Freeport, Long Island Unemployment Relief
Committee 25 cents scrip, undated.
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