The Roaring Twenties, the decade that followed World War I and led to the Crash,[4] was a time of wealth and excess. Building on post-war optimism, rural Americans emigrated to the cities in vast numbers throughout the decade with the hopes of finding a more prosperous life in the ever growing expansion of America's industrial sector.[5] While the American cities prospered, the vast emigration from rural areas continued to neglect the US agriculture industry, and created widespread financial despair among American farmers throughout the decade.[5] This would later be blamed as one of the key factors that led to the 1929 stock market crash.[6]
Despite the dangers of speculation, many believed that the stock market would continue to rise indefinitely. On March 25, 1929, after the Federal Reserve warned of excessive speculation, a mini crash occurred as investors started to sell stocks at a rapid pace, exposing the market's shaky foundation.[7] Two days later, banker Charles E. Mitchell announced his company the National City Bank would provide $25 million in credit to stop the market's slide.[7] Mitchell's move brought a temporary halt to the financial crisis and call money declined from 20 to eight percent.[7] However, the American economy showed ominous signs of trouble.[7] Steel production declined.[quantify] Construction was sluggish.[quantify] Automobile sales went down.[quantify] Consumers were building up high debts[quantify] because of easy credit.[7] Despite all these economic trouble signs and the market breaks of March and May 1929, stocks resumed their advance in June and the gains continued almost unabated until early September 1929 (the Dow Jones average gained more than 20% between June and September). The market had been on a nine-year run that saw the Dow Jones Industrial Average increase in value tenfold, peaking at 381.17 on September 3, 1929.[7] Shortly before the crash, economist Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau."[8] The optimism and financial gains of the great bull market were shaken on September 18, 1929, when prices on the New York Stock Exchange (NYSE) abruptly fell a few days after a well publicized warning from financial expert Roger Babson that "a crash was coming". The initial September decline was thus called the "Babson Break" in the press.
On September 20, the London Stock Exchange officially crashed when top British investor Clarence Hatry and many of his associates were jailed for fraud and forgery.[9] The London crash greatly weakened the optimism of American investment in markets overseas.[9] In the days leading up to the crash, the market was severely unstable. Periods of selling and high volumes were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot–Hawley Tariff Act, which was then being debated in Congress.[10]
On October 24 ("Black Thursday"), the market lost 11 percent of its value at the opening bell on very heavy trading. The huge volume meant that the report of prices on the ticker tape in brokerage offices around the nation was hours late, so investors had no idea what most stocks were actually trading for at that moment, increasing panic. Several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.[11] The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf.
Academics see the Wall Street Crash of 1929 as part of a historical process that was a part of the new theories of boom and bust. According to economists such as Joseph Schumpeter, Nikolai Kondratiev and Charles E. Mitchell the crash was merely a historical event in the continuing process known as economic cycles. The impact of the crash was merely to increase the speed at which the cycle proceeded to its next level.
Milton Friedman's A Monetary History of the United States, co-written with Anna Schwartz, advances the argument that what made the "great contraction" so severe was not the downturn in the business cycle, protectionism, or the 1929 stock market crash in themselves - but instead, according to Friedman, what plunged the country into a deep depression was the collapse of the banking system during three waves of panics over the 1930–33 period.
https://en.wikipedia.org/wiki/Wall_St...
