ENSICLOPEDIA – On October 29, 1929, a decade of glamor, glitter, and progress came to a sudden end with a massive financial crash. With Black Tuesday’s fall of the New York Stock Exchange came a number of destructive ramifications—from bank closures to soaring unemployment rates—which all paved the way for the decade-long Great Depression.
In the lead up to that fateful day, American stock prices had started falling after a long period of abnormal highs—most significantly when the London Stock Exchange crashed on September 20 of that year.
But it wasn’t until October 24, 1929, now called Black Thursday, that full-blown panic began to sweep through Wall Street. Over the next few days, the Dow Jones Industrial Average would continue its swift decline, while fearful traders sold stocks at damaging volumes.
As a result, prices changed too quickly for the ticker to record, leaving everyone with outdated and useless information. Several prominent bankers aimed to restore calm by buying up blue-chip stocks, though their actions only had a temporary effect. The worst was yet to come.
And on October 29, come it did. The desperate trading of roughly 16 million shares, a record-breaking number, led to the loss of billions of dollars and the official collapse of the New York Stock Exchange. Today, it’s known as Black Tuesday—an inciting incident of the Great Depression. But how exactly did this happen?
The end of World War I created a hunger for expansion, which, in turn, grew into an obsession with wealth and excess. Thus, the 1920s were “the Roaring 20s”, as the U.S. became the world’s leading financial power; new technologies came into play, and Western stock prices rose to unprecedented levels. With such a successful economy, it was impossible not to feel that the worst days were well and truly over.
It was the perfect environment for a credit boom—and, eventually, a shocking amount of debt—which also allowed overconfident consumers to buy stocks “on margin” (paying for a just small percentage of the value).
Combined with overproduction, a flawed banking system, and a failing agricultural sector, a catastrophe like Black Tuesday was practically inevitable.
The ramifications of the Black Tuesday crash would spread quickly through the industrialized world, even causing the German resentment that would become a breeding ground for Nazi thought and the beginnings of World War II, but on October 29, Americans were only aware of the devastating effects on their own pocketbooks.
Although the extent to which the stock crash itself caused the Great Depression is and will be debated for years to come, there is no doubt of Black Tuesday’s iconography as the flashpoint of the worst financial crisis suffered by the United States.
In their book The Day the Bubble Burst, authors Gordon Thomas and Max Morgan-Witts recount the events preceding, during, and following the crash through the eyes of those involved.
Some of their subjects are prominent historical figures—such as J.P. Morgan and Henry Ford—while others are everyday citizens, but the result is a deeply humanizing study of one of history’s greatest financial disasters.
Keep reading for an excerpt that places you at the center of the Black Tuesday drama, as veteran brokers, telegram deliverers, and bankers-slash-embezzlers scramble to make sense of the mayhem.
The panic carried uninterrupted into the early afternoon.
Steel was sinking toward $170. General Bridgeman and his staff were ankle-deep in paper.
At Post Five, eighty-six-year-old William Wadsworth—who had endured the 1907 panic and even earlier ones in the previous century—had never experienced such sustained fury. Men who normally treated the oldest broker on the floor with the deference his age and service demanded now hurled abuse at Wadsworth as they dumped rail stocks “by the bucketful.”
Nearly all of the 751 investment trusts had been virtually wiped out; the trusts had been founded, one bitter critic was to write, “on the same solid economic principles as the promotions of the Middle Ages financing the alchemists attempting to transmute base metal into gold. They were designed mainly to attract the spare dollars poor people had saved”
Most of those savings had now vanished in the whirlwind of selling.
Steel, the rails, the coals, the motors were swept away with the stocks of corporations, oil companies, and the other giants of industry.
Men wept openly in the Exchange. A few, doubtless for the first time in years, were driven to prayer, kneeling in impromptu supplication at the edge of the floor. Many went to nearby Trinity Church.
It had totally filled for the thirty-minute service that began at noon, and would remain so for the rest of the day. For the first, and possibly only, time until now, Protestants, Catholics, and some Jews gathered together in Trinity, oblivious of its denomination, drawn there simply because it was a place of worship.
By early afternoon, Wall Street was blocked almost solid from Broadway to the river by an estimated ten thousand men and women. Rumors passed up and down the Street, bounced into adjoining streets, were enlarged, and bounced back into Wall.
Nobody knew what to believe; nobody knew how to behave.
There was no precedent for such a disaster.
By one o’clock, the orgy of selling on the Stock Exchange had risen to 12,652,000 shares.
It showed no sign of stopping.
Source: The Archive
