![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyv8HJa8GqGXR5Ysx8LX_mKxk4toF-V7CkI3MjT_jjH7q-2JhiWYQYtpUZrxWU1tVSYAHnrvE5n42MsyCLUa4rj-XEmTHjkqaMJKzOjHZn3FTBvXmFUVELdzEKOMWIAe5PtmUwWvOF8Bn6/s320/tuesday1.jpg) |
Image courtesy post-gazette.com |
On this day, in 1929, prices on the New York Stock
Exchange collapsed, forever being known as Black Tuesday and helping to usher in the
Great Depression. The Great War, as
World War I was known before there was something to properly compare it to, had
brought more death and devastation than anyone still alive had ever seen
before. The collective reaction to all that grimness was to pull up your
hemlines, loosen your morals a bit and have a good time while you could. Or at
least that’s how the decade known as the Roaring Twenties is depicted today.
It is true that the
1920s gave rise to a lot of different trends. Women had just been given the
right to vote and were asserting themselves like never before. People began
flocking to cities, looking for better paying jobs and a ritzier lifestyle than
could be found in small towns. Teetotalers convinced the government to play the
role of a stern parent by enacting a prohibition on the sale of alcohol, which
didn’t cut down on the amount of booze people consumed but it did make having a
drink more exciting. Movies exploded into theaters across the country, silent
at first but actually talking by the decade’s end. Optimism was so thick in
America you could practically bottle it and pour it on your morning pancakes.
![These flappers in a Chicago speakeasy represented the optimism of the Roaring Twenties.](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_WLlALL8_uhoF37EojIYNjGD4sD3qhm8S9ykc1G7IeUfhXEl7LM6tZuk6bAvn9J_foTw1ofBmBBF6DZeVHNla0FF-0vzQ3BqB3t8ZgHuVgG8fKcPhSZq-hh08TOQcSJDOFh2Rt1RTLw68/s320/tuesday.png) |
Image courtesy pinterest.com |
That good feeling
was also reflected in the stock market. The Dow Jones Industrial Average
experienced a nine year boom cycle that saw it increase in value tenfold. The
bull market was so long and so high that many investing experts declared it
would never end, the market had reached a permanent plateau. They were, of
course, wrong. But what happened to make them so wrong?
It turns out there
were some definite yangs to go along with the optimistic yins and not everyone
in the country was prospering, especially those who actually lived in the
country. Even with huge chunks of Americans abandoning rural areas, the farmers
who remained were better than ever at what they did. The overabundance of
agricultural products throughout the Twenties caused prices to drop
dramatically, a good thing for someone trying to feed their family on the
cheap, a terrible thing for someone trying to make a living growing things. There
was widespread poverty slowly gripping wide swaths of America. Meanwhile, in
cities, Prohibition had basically given a green light to organized (and
frequently not-so-organized) crime. The rise of speakeasies, rum runners and
mythical creatures like Pretty Boy Floyd and Al Capone made for great newsreels
at the theater but also made it much more dangerous to live in urban areas.
![On the other hand, Al Capone represented the dark underside to the decades excesses.](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqxwJYbFBCDfM8ov1s6yhXraNLmGBpvem4qCcFXUQG3zzS6kV7jMl8w5VbrXEg75eK049nlyvESujP3fkTfjpu2Npd2ndBFe2fQtcW5McMR5lamDjcCnlaTdfhnuNQV1N4fgQPDlA2spFn/s1600/tuesday.png) |
Image courtesy mysteria-app.com |
One of the real
kickers, though, was that although it seemed like money was flowing like a
river everywhere you looked, most of that was an illusion, especially when it
came to stocks in the second half of the decade. As the market rose and rose,
more and more people wanted to get in on the bonanza. Most people also didn’t
have much cash lying around to invest. Not an issue said the banks. The future
is so rosy, we’ll lend you the money to buy stocks. You’ll have no problem
paying us back. Buying stocks on margin, as that practice is known, is rarely a
good idea. If the market goes down even a little bit, you can quickly find
yourself in deep trouble. Buying stocks with up to 70% borrowed funds, is just
plain stupid. And yet that is exactly what banks were letting people do. By
August 1929, there was an estimated $8.5 Billion in borrowed money invested in
the stock market, more than all the currency in circulation in the entire
country. In spite of the fact that trouble had already been brewing for several
months.
![Roger Babson was one of the few financial experts to warn people of a coming crash in the market.](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdKTYMSveoyQ51QdqVv_tAfmjxloMZjUx2B2kbmRIZgNZKR6KUJXz3tLgH0lsYqbmU4O2t968KTLvnC9U-fCS6PdE59UJcSRUG2xPwoQmmN8qjCxAr3p8ijOtt7SYgJ7WbGZpXiIb-9nwk/s320/tuesday.jpg) |
Image courtesy babson.edu |
At the end of March
1929, the Federal Reserve issued a warning, concerned about how many stocks
were being purchased on margin. That warning caused a small crash on March 25,
as many investors decided to cash in all at once. National City Bank announced
two days later that it would loan out an additional $25 million in an attempt
to stop stock prices from falling. The tactic worked. Even though troubling
news kept pouring in from other areas in the economy (construction was flat,
steel production and car sales declined, consumer debt was climbing), the
market not only rallied but gained 20% between June and September.
Near the end of
September, two things happened that would seal the fate of the New York Stock
Exchange. First, Roger Babson, a leading expert in finance at the time, warned
of a coming crash. His words became a bit self-fulfilling as a bunch of
investors believed him and prices dropped dramatically. Most people shrugged
Babson’s prediction off and called the dip a necessary market correction,
nothing to be worried about. Second, the London Stock Exchange crashed badly on
September 20 when Clarence Hatry, one of its top investors, and his cronies were
thrown in prison for fraud. The instant weakening of foreign markets to
American businesses caused the US market to begin to wobble. Over the next five
weeks, there were a few days of volatility followed by a few days of calm and
then back to volatility.
![Some of the bankers who lost everything in the crash could no longer face life and literally leaped to their deaths.](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqel7pmXVqBBHWPqE55OYIfrLFZUk8xB5zWiSedoCkcLrdQyNvrDzE252ZLS_lQGIQiEJswYRxJ9KpuMK0Z65lRdYmUAUgT5cpqd7RcdR39GKBLB9stEToEWS8m1Kpx8cTnlepgqsWG7fP/s320/tuesday.jpg) |
Image courtesy worststockmarketcrashes.com |
As October crawled
along and investors got more and more nervous, the sell offs started picking up
speed. On Thursday, October 24, the
market lost 11% almost as soon as it opened. Employing a tactic they’d used to
stop a crash in 1907, several Wall Street banks banded together and made bids
to buy up large chunks of US Steel and other blue chip companies for more than
the asking price. By the end of the day, the Dow Jones was only down 6 points (less
than 2%). The rally continued on Friday, erasing the rest of the loss. Crisis
averted. Or not.
Over the weekend,
most of the country’s newspapers carried big stories about the events of
Thursday and Friday. All the investors who had borrowed all that money got
totally spooked. When the market opened on Monday, October 28, the Dow posted a
record loss of 13%. Wall Street was out of options and could do nothing but
watch the slide. Many stocks couldn’t find buyers at any price as investors
seemed frozen in disbelief. The following day, Black Tuesday, over 16 million
shares of stock were traded, a volume record that would stand for next four
decades. The Dow lost an additional 12% of its value. The market as a whole
lost $30 Billion in just two days. In 1929.
![Investors who had lost everything in the stock market crash were desperate to get their hands on some real money.](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUqrXPgNBVmCx3gnR3JYj7pGLLWgCwcqLnL7w3Rq-aok2FcJG_7tmWXdMor8L7J1PP28gBP1iwIceHnTVpTynljzET-veYoQ7avrLd3frkyDkcEDU_93EI681JkZNjZJ__-jYwOxJoP26v/s320/tuesday.jpg) |
Image courtesy explorethearchive.com |
October 30, 1929
would see a one day rally in prices with the Dow gaining 12% back, but the
euphoria was short lived. By November 13, the market had lost nearly 48% of its
value. There would be mild gains over the next few months followed by another
long decline. The market bottomed out on July 8, 1932 when the Dow closed at
just over 41 points, the lowest of any day in the twentieth century,
representing a loss of 89% from less than three years before. By that point,
the United States, along with the rest of the world, was mired deep into the
muck of the Great Depression, by far the biggest financial crisis of modern
times.
Also on this day, in Disney history:
The Nightmare Before Christmas