Many will doubt the headline. Really, in percentages, in numbers, the crack of 29 It was not the biggest stock market crash since 1987 with Black Monday or 1992 with the oil crisis were worse, but at a social and historical level, its importance was such that it could be said that it changed the world. And it is that before they had neither the means, nor the knowledge, nor the experience to solve crises like this. Let’s find out what happened with the Crack of 29: The biggest stock market disaster in history.
The crash of 29 | The origin
The origins to stock market crash of 1929 it can be searched even at the end of the First World War. During this time, the end of 1910 and the beginning of the 20s, some of the main European powers, such as France, Germany or the United Kingdom, were recovering after the harsh conflict, where human losses had to be added to material and infrastructure losses. . However, the United States, which had barely participated in the war, found a perfect setting to gain a dominant position.
Living the calls roaring 20’s, the situation in the United States seemed to be getting even better as the major European nations began to recover and invest again in imports and foreign trade. During these early 1920s, the stock market was in good shape, except for sporadic declines in 1921 and 1922.
The Stock Market had been rising non-stop since 1924, the reason for these rises was confidence in the country’s economic boom, while credits referenced to stock certificates grew, a large financial bubble was about to burst.
The population trusted the economic system, bought shares of industrial companies that were beginning to flourish, making the New York Stock Exchange the center of the world economy.
The imbalance between Europe and the US was huge and the products that Europe bought from the US did not generate enough profits to cover the expansion of the industry, fundamentally based on hydrocarbons and all the industry derived from it. of this, such as the automobile industry, road civil works, etc.
This financial bubble produced some serious economic imbalances in society. It has been considered one of the most serious economic crises in history due to the seriousness of the situation, due to the length of time and due to the serious consequences that it brought with it.
The crisis of 1929 not only affected the US, but also transformed the lives of a large part of the world. With the investments that a recently recovered Europe had made in an apparently strong stock market, it provoked a new convulsion. The results were terrible, the rise of rivalries between nations, with the fall of liberal thought, They quickly saw the need to seek solutions and other ways of understanding the economy and society.
The crash of 29 | The Disaster of 29
In March 1929 the strong increases still continued, however, they began to circulate rumors that the Federal Reserve was preparing measures that could alleviate possible recessions and economic downturns. The nerves began to flow through the parquet. Big tycoons started to leave, like Joe Kennedy. The first setback occurred on March 25, 1929.
The index fell 9.5 points. On Tuesday the 26th, the nerves were unleashed and what could be sold was sold. Interest shot up to 20% in one day, however, Charles Mitchell used money from the Federal Reserve Bank to cover sales and that stopped the fall and restored confidence. Even so, that second day of panic, the stock market fell 15 points.
The scare was quickly forgotten and soon the stock market began to rise strongly again. The stock market rose 118 more points in the first 8 months. The credits were already shooting up to 7,000 million. In October 1929 the stock market seemed tired, and on Friday the 18th the index fell 8 points. It was just a drop before going up, most thought. On the contrary, they took advantage of the two days of fall to buy “cheaper”.
On Wednesday the 23rd, the stock market suffered a major blow by lowering in a single session 31 points (almost 7%). That day was only an omen of what would happen the next day: the fateful and remembered Wall Street Black Thursday. So much paper came out at once that prices began to fall uncontrollably.
The Stock Market went into free fall, Stockbrokers desperately asked for guarantees for those titles that had been bought on credit, but obviously, nobody could cover them. The same stockbrokers, to cover these losses, sold more shares causing further declines. This happened several times during the session, when people were still working loudly in the circles. The session was a real pot of crickets where the nerves appeared for the slightest setback.
Rumors of suicides began to circulate and people on the street, curious, began to enter the facilities or accumulate in the street. The police had to intervene to disperse them. That was chaos. But curiously, in a new glimpse of stock market madness, when everyone accumulated losses, the first purchases appeared. Five big banks invested heavily.
At the end of that Black Thursday, the drop was only 12 pointshardly anything, but in between, had left many American families in the most complete ruin.
During these moments, photos and stories of mass suicides are famous, people throwing themselves from buildings after having lost absolutely everything. In fact, ultimately, the stock market crash affected families and small investors more than large companies, many of which even profited from the stock market crash.
But the stock market was touched by mistrust. On Monday, October 28, the Stock Market fell 49 points but the one that went down in history was Black Tuesday. That day more than 16 million titles were sold, the sales record, and the index fell 43 points.
It was not only that day that ended up bankrupting banks, companies or private investors. It was that succession of vertiginous falls, which accumulated, knocked down the great fortunes. In a few days, the US stock market had lost 25% of its value, almost five billion dollars at the time.
And as happens in great crises, if that was the culmination in a single session, it was by no means the minimum that was reached. By mid-November, the US stock market had already lost half its value.
In just one month it had gone from 415 to 224 points, and so on until its historical minimum was marked on June 8, 1932more than 2 and a half years after continuous declines, which finally left the North American index at 58 points!!.
Frauds were discovered (the facts by those who thought they could take money out of companies, invest it, earn it and quickly return it to the company), there were entire families ruined, there were mass suicides, bank failures, they closed more than 4,200 banking entities leaving without funds to who had their savings in it, etc.
The sectors that helped cause this terrible crisis were agriculture, old industry and the international monetary system. Black Thursday 10/24/1929, with the crash of the New York stock market, caused a long period of currency deflation, which lasted 10 years from 1929-1939.
Deflation was a reason, together with the accumulation of products in stocks that have no outlet on the market, a high unemployment rate, the fall in production and the breakdown of the payment system of foreign countries, marked a before and after in most countries with a capitalist system.
The crash of 29 | International Consequences
And as happens in all falls, it finally ended up reaching South America, Europe, and even Australia. That crisis ended up insulting Primo de Rivera in Spain, who was blamed for the serious economic crisis that Spain was going through, giving rise to the Second Republic in Spain.
England closed behind its borders and abandoned the gold standard, unemployment soared in France and England. The unrest and social tension resulting from the economic crisis skyrocketed and in Germany, a young Austrian soldier began to make its way as a symbol of economic salvation and German power, it was called Adolf Hitler.
The investments had been directed speculatively to the United States and the speculation seriously harmed Germany, which saw unemployment rise to more than 6 million people and little by little an irrational hatred towards capital rose among the social masses. From 108,000 Nazi cards in 1929, there were 800,000 three years later.
That hurricane called the crack of 29 in New York had unleashed the greatest European and world crisis that is remembered in the 20th century. Hitler enters the scene and with him, shortly after the Second World War. Until the recent 2008 crisisno greater global recession was remembered than the one that emerged in New York City in 1929. Both originated in Wall Street, but with different reasons and at different times.
In short, the stock market crash had some specific characteristics and reasons, but it also shares similarities with other economic disasters, where much of the blame rested with the speculation. The 1920s were a very productive time to do business in the United States, where business was very profitable in the short term.
The crash of 29 | conclusion
Small investors lived on their investments in the stock market. The agents gave money to their clients in exchange for titles and shares and borrowed money from the banks to pay these titles since once sold they would obtain liquidity to face the interest on the loans. However, this action based on speculation ended up being one of the main reasons for the final crash of the Stock Market in 1929.
Video about the crack of 29
The crash of 29 was a situation that completely collapsed the North American financial system, of a country like the United States, which had been the main beneficiary after the 1st World War. The following documentary investigates even more about how the famous stock market crash was forged and what its dramatic consequences were.
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