Type a new keyword(s) and press Enter to search

Stock Market Crash of 1929

 

             Warburg, an originator of the Federal Reserve System and an extremely prestigious banker, pointed out to the American public that the "unrestrained speculation" (Galbraith) in the stock market would surely come to an end in a disastrous collapse if it was not brought under some sort of control. It was made clear to the public that Warburg obviously didn't appreciate the new era in economic well being that the market was reflecting so well. Many critics accused him of "sandbagging American prosperity" (Galbraith). People were investing in the stock market in record numbers. The "technology stock" of its day, RCA Victor, was popular, in spite of the fact that it yet to pay a dividend. To the people at that time, it did not seem possible that solid stocks such as American Can or AT&T would or could ever go down. Such was thought in 1999 and we are still feeling the effects of that. Other authorities did not broadcast such gloom, but showed appreciation for the growing economy. .
             During the mid 1920s the stock market underwent rapid expansion. The Dow Jones Industrial Average went from a low of 191 in early 1928 to a high of 300 in December 1928 and peaked at 381 in September 1929. Due to the anticipation of continued increases in earnings and dividends, price/earnings ratios rose from a conservative 10 or 12 to 20, and higher for the market's favorite stocks. On October 3 the Dow Jones began to drop and declined throughout the week of October 14. One method investors used to borrow money was margin buying. The investors only had to put up a certain percentage of the amount invested and the bank or institution would give the rest. If the price of stock went down the investor would get a margin call and be required to put up more money. The night of October 21,1929, margin calls were heavy, and numerous Dutch and German sell calls came in overnight for the Tuesday morning opening. On Tuesday morning, out-of-town banks and corporations called in $150 million of loans, and Wall Street was in a panic before the New York Stock Exchange opened.


Essays Related to Stock Market Crash of 1929