What is the Stock Market Crash of 1929?

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The Crash of 1929

During the 1920s millions of Americans began to purchase stocks for the first time. Many new investors entered the stock market with borrowed money. Stock prices rose steadily as inflated market demand outpaced increases in the value of the real assets of these businesses as well as their profits. Investors eventually realized that a large imbalance existed between stock prices and the real assets available to back them up, including profits, and decided to sell. On October 29, 1929, great numbers of people tried to sell their stocks all at once. Prices tumbled so drastically on the NYSE and other exchanges that the event became known as the crash of 1929. Millions of investors lost their savings in the crash, and many found themselves deeply in debt because they could not repay the money they had borrowed to buy stocks.

During the years immediately following the crash, most investors refused to put any more money in stocks. Without the flow of new funds, many businesses failed, and others laid off many workers because they could not afford to pay them. The lack of investment funds contributed to the Great Depression of the 1930s, an economic crisis that left one of every four American workers unemployed and resulted in widespread poverty.

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