On the 29th October, the drama of the stock market crash of 1929 plateaued, ending a Dow Jones industrial average fall of 25% over the previous 2 days. Though the decline did level, further falls continued, (wiping 89% of value off the stocks), to a record low in July 1932, which would not be recovered until nearly a quarter of a century later in 1954.
Eight decades on, financial experts still debate the exact cause of the problems. It is clear however that the weak rules and regulations of the stock market were a contributing factor; whilst the boom and subsequent bust of the decade before has to be mentioned.
Whilst the good times preceding the decline makes the slump more dramatic; the effects were far reaching. Unemployment rose to a never before seen 25%, and the economy fell by a third. The banking system too fell apart, and was closed down for two weeks as the Federal government analyzed trading documents.
The fall out was not restricted to the US, as the wider global economy become caught up in the crisis. Imports from foreign countries were taxed heavily, and the US moved away from the gold standard destabilizing trading across the board.
Whilst the government of the day under Herbert Hoover tried to remain positive; millions were forced into poverty despite the best attempts of charitable foundations of the day.
Whilst rescue packages came and failed, it was only when FD Roosevelt took presidency in 1932 that the recovery began. Social security was introduced, whilst unemployment relief was organized for the first time.
However, it was only when the US became economically involved in the Second World War that unemployment truly recovered as strength returned.
the stock market crash of 1929 was severe, and lessons with how to manage the current crisis have been learned and implemented. We see this now with coordinated responses across the world, as an understanding that all industries are linked; no matter the diversity.
We can learn a lot from the stock market crash of 1929 which should help us prevent future such problems, but human nature says otherwise. We are quick to forget in times of excess. For more investing related information you can sign up for the stock market newsletter at the aforementioned site.
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