The stock market, in the 1920s, had been on a steady climb. Stocks were profitable for people of all walks of life, from the bankers to the common citizen. The banks were making money from people who borrowed funds to buy stocks, and the people who borrowed funds from the banks for stock purchase were then selling said stocks to other individuals at a higher price. Everyone was happy and all were making money. Blinded by the hope of great fortune, investors failed to realize that what goes up, must come down. Early in 1929, forecasters were calling for the stock market to enter a recession by the end of the year, but most did not heed the admonishments. However, in late October 1929, th

The leading factor of the crash of 1929 can be attributed to the wild speculation that was going on in the latter years of the decade. As noted above, everyone was making money off the market. Margin trading was the norm. Stock prices continued to rise as long as there were buyers. The problem, though, was that eventually, the supply of buyers would level off, and so, too, would the prices. John Kenneth Galbraith, author of The Great Crash 1929, states, “When prices stopped rising – when the supply of people who were buying for an increase was exhausted – then ownership on margin would become meaningless and everyone would want to sell. The market wouldn’t level out; it would fall precipitately” (Galbraith 29).

e forecasts proved true. No single incident is directly responsible for the three-day event that would come to be known as The Great Crash of 1929. Instead, a series of occurrences combined at precisely the right time to form a black cloud over the United States economy.

While Wednesday, October 23 was extreme, what history would call Black Thursday, October 24, would prove to be far worse. Black Thursday is designated the first day of the great panic of 1929, and for good reason. On that day, nearly 13 million shares of stock were traded at prices that sickened those who had owned them. The shear volume of trading taking place caused the ticker to run behind by as much as two hours, and by the time the value of a certain stock was displayed, its price had dropped steeply from what was shown. All of the uncertainty about prices and the fact that the prices were plummeting lead stockholders to sell as fast as they could. Meanwhile, top banking officials held an emergency meeting to pool their resources together to save the market. When word spread throughout Wall Street, the market turned around and for a few hours at least, there was a spectacular recovery. However, “across the country, people were only dimly aware of the improvement. By early afternoon, when the market started up, the ticker was hours behind [...] and continued to grind out the most dismal of news. In the closing hour [of the market], selling orders continuing to come in from across the country turned the market soft once more” (Galbraith 108-09). Friday and Saturday remained steady, but the recovery would be short-lived.

To fully understand the frenzied speculation that was occurring, it is important to note exactly what was feeding the frenzy. In short, the answer was easy credit. Banks offered credit like candy in the final years of the 1920s. “Banks [supplied] funds to brokers, brokers to customers, and the collateral [went] back to the banks in a smooth and all but automatic flow” (Galbraith 25). Easy credit facilitated margin trading, and margin trading proved extremely profitable for all involved. The rush to purchase stocks on margin peaked in the winter of 1928, with brokers’ loans increasing by almost one billion dollars fr

Some topics in this essay:
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