1929 Stock Market Crash Facts For Kids To Learn From

The Great Disaster of 1929, also known as the Wall Street Crash, was a catastrophic stock market crash in the United States that happened in the fall of 1929.

It began in September and concluded in late October, when the New York Stock Exchange's stock values plummeted. Read more to find out more about the stock market crash of 1929.

The stock market crash of 1929 was a panic selling of shares on the New York City Stock Exchange as the market dropped. Financial leaders and many investors traded everything at market value rather than waiting for a profit, even small investors.

After the stock market crash of 1929, the wave of unemployment rose and brought a financial crisis to the American economy. No one expected this to happen in early October.

The 1929 stock market collapse, also known as the 'Great Crash', was a dramatic drop in stock market prices in the United States in 1929 that contributed to the Great Depression of the '30s. The Great Depression lasted almost 10 years and impacted both industrialized and non-industrialized nations throughout the globe.

The stock market in the United States grew rapidly in the mid-to-late '20s . Banks pumped billions of dollars into Wall Street for broker loans to fund margin accounts.

The Mississippi Bubble and the South Sea Bubble had both returned as spectacles. People sold their Liberty Bonds and took out mortgages to invest in the stock market.

Around 300 million shares of the stock were carried on margin in mid-summer 1929, propelling the Dow Jones Industrial Average to a high of 381 points in September. Any warnings about the financial house of cards' shaky underpinnings went unheeded.

Read on for some interesting facts about the 1929 stock market crash and also check out these 1926 fun facts and 1928 facts here at Kidadl.

Facts About 1929 Stock Market Crash

The 1929 stock market meltdown began on October 24, 1929, with a drop in stock prices. By October 29, 1929, the Dow Jones Industrial Average had reduced by 24.8%. It shattered Wall Street's confidence and precipitated the Great Depression.

Black Thursday was the first day of the crash. The Dow Jones Industrial Average began trading at 305.85. It dropped 11% right afterward, foreshadowing a stock market slump. Trading volume was three times more than usual. Wall Street bankers rushed to buy shares to keep it afloat. The plan was successful.

The favorable trend resumed on Friday, October 25. The Dow Jones Industrial Average is now at 301.22, up 0.6%.

The Dow plunged 13.47% to 260.64 on Black Monday, October 28.

The Dow plunged 11.7% to 230.07.2 on Black Tuesday, October 29. Investors panicked and sold 16,410,030 shares.

This was followed by two more collisions:

A 12.93% decrease in the stock market in 2020.

On Black Monday 1987, there was a 22.61% drop.

Facts About The Recovery From The 1929 Stock Market Crash

According to Wall Street legend and historical data, the stock market collapse of 1929 took 25 years to recover from. Some recent experts, however, disagree with this viewpoint.

In reality, although not being a constant ascent, the rebound from the low point provided investors with possibilities to earn money and potentially repay their losses from the crisis considerably sooner than the 25-year milestone.

Dow Jones Index Changes

The Dow Jones industrial average did not have a consistent membership in 1929. Some stocks have been removed from the average, while others have been added.

When the Dow returned to its previous high point 25 years later, it did so with stocks that were not there before the collapse. This implies that comparing the Dow's values in 1929 to those 25 years later is like comparing apples to oranges.

Stocks by Themselves

In four years, several individual equities had recovered. Dow Chemical, for example, had rebounded to break even by 1933. 3M and Honeywell by 1936, had recovered. Stocks took an average of 12 years to recover. While this implies that some took longer, others required far less time.

Market As A Whole

An investor might have completely recovered from the 1929 stock market crisis in four and a half years. He grounds his assertion on the fact that deflation and inflation were not included in genuine stock prices throughout the time period, and that dividends were paid at a rate of 14% on average.

He further points out that the Dow does not represent the whole market, and that the wider market included several fast-recovery equities.

Recovery Vs. Revival

Though the market did not entirely recover in 1930, it did experience a succession of ups and downs as it attempted to resurrect itself. Stocks on the New York Stock Exchange regained 73% of their losses in 1930. Each surge was followed by a depressing collapse, but the market never returned to the turmoil and terror of 1929.

Facts About The After Effect Of 1929 Stock Market Crash

The stock market crash of 1929 and the subsequent Great Depression (1929-1939) had a profound influence on practically every aspect of society, transforming an entire generation's perception of and connection with financial markets.

In some ways, the period after the market collapse was a complete reverse of the mindset of the Roaring '20s, which had been marked by enormous optimism, strong consumer spending, and economic expansion.

The stock market collapse of 1929 was caused by an unsustainable increase in share values in the previous years. The excessive enthusiasm of investors, who bought shares on margin, and overconfidence in the durability of economic expansion prompted the stock market to soar.

Some economists believe the boom was aided by 'easy money' in the mid-'20s when US interest rates were kept low.

The Great Depression and the stock market crash of 1929 combined to create the 20th century's biggest financial catastrophe. The panic of October 1929 has come to symbolize the global economic recession that followed over the following decade. Except for Japan, all financial markets saw near-instantaneous drops in share values between October 24, 1929 and October 29, 1929.

From its aftermath till now, the Wall Street Crash has had a significant influence on the US and global economies, and it has sparked intense scholarly historical, economic, and political discussion. Some individuals claimed that utility holding firms' misdeeds led to the 1929 Wall Street Crash and the subsequent Great Depression.

Many individuals blamed the disaster on commercial banks, which were too willing to gamble their life savings on the stock market.

Facts About the Causes Of the 1929 Stock Market Crash

Here are some interesting facts about the causes of the 1929 stock market crash that will help you better understand the reasons behind the event.

Credit Expansion

In the United States, bank credit and loans grew rapidly in the '20s. People believed the stock market was a one-way gamble because of the economy's strength.

Some others took out loans to acquire stock. More loans were taken out by businesses in order to expand.

People were more sensitive to a shift in confidence as their debt levels increased. People who had borrowed money were especially susceptible when the stock market fell in 1929, and many joined the rush to sell equities and try to pay off their loans.

Purchasing on The Edge

The practice of purchasing stocks on the margin was linked to buying on credit. This meant you just had to pay 10% or 20% of the stock's worth; you were borrowing 80-90% of the stock's value. This allowed more money to be invested in shares, resulting in a rise in their value.

Many 'margin millionaires' were alleged to have invested. They'd earned a fortune by purchasing on the margin and profiting from rising stock prices.

However, when prices collapsed, it left investors very vulnerable. When the stock market crashed, these margin millionaires were wiped out. It also impacted banks and investors who had given money to those who were purchasing on margin.

Irrational Euphoria

Over-exuberance and erroneous expectations may be blamed for a large part of the stock market disaster. The stock market gave people the opportunity to make significant financial gains in the years running up to 1929.

It was the start of a new gold rush. People purchased stocks in the hopes of generating more money. As stock prices rose, people began to borrow money to invest in the stock market.

The stock market became engulfed in a speculative bubble. Shares continued to rise, and investors believed they would continue to do so. The issue was that stock prices had become disconnected from their true prospective profits.

Prices were driven by investor confidence and enthusiasm rather than economic realities. Between 1923 and 1929, the average earnings per share increased by 400%.

Those who questioned the value of stocks were often referred to as 'doomsayers'. This isn't the first or last time an investment bubble has popped. A situation comparable to this just occurred in the dot-com bubble.

A Discrepancy Between Supply and Demand

The '20s witnessed significant advancements in manufacturing processes, particularly in areas such as autos. The manufacturing line allowed for large-scale economies of scale and significant increases in output.

On the other hand, the demand for costly automobiles and consumer goods was straining to keep up. Hence, towards the end of the '20s, many businesses were unable to sell all of their output. This resulted in some disappointing profit figures, which led to a drop in stock prices.

Recession in Agriculture

Even before 1929, the agriculture industry in the United States was battling to stay profitable. Because they couldn't compete in the new economic environment, many small farmers were forced out of business.

Better technology was increasing supply, but not at the same time that demand for food was increasing.As a result, prices plummeted, and farmer profits plummeted as well. In this industry, there were occupational and geographic immobilities, making it difficult for jobless farmers to find work elsewhere.

The Financial System's Flaws

The American banking system was characterized by a large number of small and medium-sized businesses prior to the Great Depression. There are approximately 30,000 banks in the United States. As a result, if there was a run on deposits, they were more likely to go bankrupt.

Many banks in rural regions, in particular, went bankrupt as a result of the agricultural downturn. The rest of the financial sector suffered as a result of this. 5,000 banks failed between 1923 and 1930.

Monetary Policy's Role

The discount rate for the United States is set by the Federal Reserve Bank of New York, St. Louis.

Interest rates in the United States were kept low throughout the mid-'20s. However, when we consider the very low rate of inflation, real interest rates were significantly positive.

The Federal Reserve started boosting interest rates in 1928, partially in response to soaring stock values. The decision to raise interest rates to 6% slowed economic growth and decreased demand for stocks.

Here at Kidadl, we have carefully created lots of interesting family-friendly facts for everyone to enjoy! If you liked our suggestions for 1929 Stock Market Crash facts for kids to learn from, then why not take a look at 1931 China floods facts, or '30s America facts.