Why the Stock Market Crashed in 1929
The stock market crash of 1929 was the biggest financial disaster in American history. It ushered in the Great Depression and a dark period of struggle for the country. But, what caused the stock market crash?
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Causes
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There were several reasons for the 1929 stock market crash: overvalued stocks, low margin requirements (10 percent), interest rate hikes and poor banking structures.
The Facts
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The stock market crash took place over a period of two weeks in October 1929. with three days referred to as Black Thursday (Oct. 24); Black Monday (Oct. 28); and Black Tuesday (Oct. 29).
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History
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In the decade before the crash, the stock market boomed, with stocks more than quadrupling in value.
Results
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During the week beginning Oct. 28, 1929, stocks lost a total of $30 billion in value.
Reforms
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In the wake of the stock market crash of 1929 and subsequent Great Depression, agencies and legislation were enacted to avoid future financial collapses: The Securities and Exchange Commission (SEC), The Glass-Steagall Act, which separated commercial and investment banking; and the Federal Deposit Insurance Corporation (FDIC) to insure individual bank accounts for up to $100,000.
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References
- Photo Credit Image by Flickr.com, courtesy of woodley wonderworks
