Stock Market Crash

At the peak of the stock market in 1929 the number of millionaires in America was 25,000-35,000. But when the stock market hit its bottom in 1932 the number of millionaires had been drastically reduced to only five thousand. Best quoting a writer in “The Financial World” states, “In this country speculation has been rampant for quite nine out of the twelve months, since Armistice Day, 1918. Up to Armistice Day anniversary, November 11, 1919, the New York Stock Exchange has records showing sales of stocks, totaling 295,000,000 shares, against 140,000,000 shares in the previous 12 months, and sales of bonds, double the previous year.” (Best The Dollar 78) The ABA, American Bankers Association, reported that total savings deposits had increased
during that period from approximately $8.5 billion to nearly $21 billion, while per capita savings had increased from $89 to $186, and the number of depositors tripled. While the ABA, American Bankers Association, may have exaggerated the increase, savings-and-loan companies did at least double in total between 1921 and 1925, while investments in common stock did the same. Instead of diverting savings to consumption though, Americans seemed to be resorting to installment buying. In 1925 installment credit for just automobiles surged about forty percent past 1924 to over $900,000,000, as auto sales jumped by about twenty percent to over three point seven million vehicles. (Best The Dollar 83-84) The New York Journal of Commerce identified that banks needed to find investments for these burgeoning deposits, but noted that the opportunities for sound investments were limited, and it worried that the unused savings were provoking banks to make unwise investments. Even school students were involved, with over 3,000,000 of them enrolled in “school savings banks” with deposits of $20.5 million in 1924. While all savings entered the stream of investment, they were separate from the money invested directly by individuals, many of whom were using the stock market as their savings bank. (Best The Dollar 84)
Throughout the 1920s America had a huge economic boom and the stock market had begun slowly growing in 1923.
The stock market had experienced a mini-crash on March 25, 1929 when investors started selling their stocks. This reveals the “shaky foundation” on which the stock market is built. This then leads borrowing and credit interest rates to go up to twenty percent. A few days after the crash however a banker named Charles E. Mitchell pledged twenty-five million dollars to try and stop the crash but was told to leave his post at the Federal Reserve for interfering. On September 23, 1929 the stock market reached its peak and the Dow Jones Industrial Average was 381.17. After this however the market starts to fluctuate erratically up and down which leads some to speculate a crash. On October 24, 1929, known as Black Thursday, stock prices fell hard with loss reported to be five billion dollars that day. Then on October 28, 1929, known as Black Monday, the stock market fell to twenty-two point six percent and starts affecting other parts of the world. The next day October 29, 1929, coincidentally known as Black Tuesday, is when worried investors start to sell their stocks which drops the stock market another twelve point eight percent by the end of the day and leads the stock market to eventually hit bottom on November 23, 1929. Though it had already hit bottom the lowest point the stock market got was in 1932 when it closed eighty-nine percent down from its highest point in 1929 (Pearson
1920s).