“The Great Depression: Thousands of Investors Go Bankrupt and the Population Panics”

Thousands of investors go bankrupt, the population panics

A significant number of influential businessmen commit suicide

On October 24, 1929, the US stock market crashed, triggering a world crisis, famine and poverty. On this Black Thursday, the Great Depression begins. The collapse of Wall Street ended the myth of the eternal prosperity of the United States, which was so widely believed in the prosperous 1920s.

October 24, 1929. A new day of the happy 20 years begins in New York. During this period, the United States experienced rapid economic growth – skyscrapers and expensive cars became symbols of prosperity. Stockbrokers prepare for the usual Wall Street routine.

Although the Dow Jones index fell 4.6% on Wednesday, no one could have imagined that on Black Thursday investors would get rid of 12.9 million securities, provoking not only an 11% decline in the index, but also the beginning of the global economic crisis. In the next few days, the stock market of Wall Street is experiencing a real shock. Thousands of investors go bankrupt, panic breaks out among the population. The chaos led to the suicide of a significant number of influential businessmen. Millions of citizens are condemned to unemployment.

The beginning of the end

The end of World War I gave way to a decade of economic recovery in the industrial and business sectors of the United States. The automotive industry, construction and banking are developing rapidly. By the end of the boom period, the United States was already producing 44% of the world’s industrial output. In those years, Americans actively invested in securities, which they often bought on credit. Encouraged by the ease of borrowing at ridiculous interest rates, virtually every saver brings money to the stock market. As a result, the number of shareholders increases significantly. By 1929, at least 1 million people were playing the stock market.

The overheating of the economy is very large and the overvaluation of assets is reaching its maximum. In addition, credit operations are growing, which is facilitated by the Fed’s policy aimed at keeping the discount rate low. At the same time, there is an extremely large group of bankers, brokers and financial analysts who do not see any threat to Wall Street, even a few weeks before the crisis they invest in the market with reckless impulsiveness.

Interestingly, the economy showed symptoms of crisis as early as the summer of 1929. Thus, industrial production reached a record in June and began to decline in July. The labor market shows the same dynamics. Consumer prices are falling and already in August the Fed has no choice but to increase the deflationary trend by increasing the interest rate from 5% to 6%. On Wall Street, all these warning signs have been ignored.

“The stock market crash of October 1929 is one of the dramatic milestones, like the assassination of Julius Caesar or the Battle of Waterloo, that historians mark turning points in human history,” writes economist Donald Hoppe. In 1923, the Dow Jones stock index was at 99 points. At the same time, on September 3, 1929, he reached a record – 381.17 points. On the one hand, the growth of stock market quotations is associated with new prospects: cars, airplanes, radio stations, skyscrapers. On the other hand, it is provoked by the activity of stock speculators.

A bottomless chasm

On Black Thursday, they try to save the day. Around 4:30 p.m., when the market surge seems unstoppable, the big bankers agree to invest $40 million to save the quotes and prevent a repeat of the crash. However, these efforts are not enough – the catastrophe can no longer be stopped.

On Friday, the hope that everything will be fine is still alive – the market temporarily stabilizes. On Monday, those gathered in front of the New York Stock Exchange expected the trend to continue, but immediately after the opening, quotations showed a rapid decline. The “Wall Street Sharks” have nothing to offer and refuse to support the market.

The famous “Black Tuesday” is the worst day of the American stock market in its history. In one week of panic, the market fell 40%, losing about $30 billion – more than the US government spent in the entire First World War. In just five days, small investors, banks and agents lose their savings, which they carefully collected for a year and a half.

A stock market crash undermines all seemingly reliable prosperity. Bankruptcies and ruin begin, unemployment rises rapidly, businesses cease to operate. Black Thursday was the beginning of the world economic crisis (1929-1933) called the Great Depression. Speculative fever, the illusion of quick and easy money gives way to poverty, hunger, recession. After some stabilization, the crashes continued in December. In 1932, the index reached 40 points, a drop of 87% from the high level of September 1929. By early 1933, the debt crisis and the fall in stock values ​​led to the collapse of the entire banking system.

The drop in industrial production is close to 50%. The threat of starvation in the United States is absolutely real. About 10 states, apart from the decline in agricultural production, are also affected by severe drought.

“Before the Great Depression, most economists had a vision of capitalism as a perfect system. That vision proved unsustainable in the face of mass unemployment, but as memories of the crisis faded, economists fell back in love with the old idealized vision of the economy,” economist Paul Krugman told The New York Times.