1929 Stock Market Crash Essay Example For Students

1929 Stock Market Crash Essay The 1929 Stock Market Crash In early 1928 the Dow Jones Average went from a low of 191 early in the year, to a high of 300 in December of 1928 and peaked at 381 in September of 1929. (1929) It was anticipated that the increases in earnings and dividends would continue. (1929) The price to earnings ratings rose from 10 to 12 to 20 and higher for the markets favorite stocks. (1929) Observers believed that stock market prices in the first 6 months of 1929 were high, while others saw them to be cheap. (1929) On October 3rd, the Dow Jones Average began to drop, declining through the week of October 14th. (1929) On the night of Monday, October 21st, 1929, margin calls were heavy and Dutch and German calls came in from overseas to sell overnight for the Tuesday morning opening. (1929) On Tuesday morning, out-of-town banks and corporations sent in $150 million of call loans, and Wall Street was in a panic before the New York Stock Exchange opened. (1929) On Thursday, October 24th, 1929, people began to sell their stocks as fast as they could. Sell orders flooded the market exchanges. (1929) This day became known as Black Thursday. (Black Thursday) On a normal day, only 750-800 members of the New York Stock Exchange started the exchange. 1929) There were 1100 members on the floor for the morning opening. (1929) Furthermore, the exchange directed all employees to be on the floor since there were numerous margin calls and sell orders placed overnight. Extra telephone staff was also arranged at the members boxes around the floor. (1929) The Dow Jones Average closed at 299 that day. (1929) On Tuesday, October 29th, 1929, the crash began. (1929) Within the first few hours, the price fell so far as to wipe out all gains that had been made the entire previous year. (1929) This day the Dow Jones Average would close at 230. 1929) Between October 29th, and November 13 over 30 billion dollars disappeared from the American economy. (1929) It took nearly 25 years for many of the stocks to recover. (1929) By mid November, the value of the New York Stock Exchange listings had dropped over 40%, a loss of $26 billion. (1929-1931) At one point in the crash tickers were 68 minutes behind. (1929-1931) An average of about $50,000,000 a minute was wiped out on the exchange. (1929-1931) A few investors that lost all of their money jumped to their deaths from office buildings. Others gathered in the streets outside the Stock Exchange to learn how much they had lost. (Black Thursday) The Cause There are five proposed reasons as to why the stock market crashed. One of the reasons was that stocks were overpriced and the crash brought the share prices back to a normal level. However, some studies using standard measures of stock value, such as Price to Earning ratios and Price to Dividend ratios, argue that the share prices were not too high. Another reason is that there were massive frauds and illegal activity in the 1920s stock market. However, evidence revealed that there was probably very little actual insider trading or illegal manipulation. (1929) Margin buying is another reason why people believed that the crash happened. Though it is not the main reason, there was very little margin relative to the value of the market. The new President of the Federal Reserve Board, Adolph Miller, tightened the monetary policy and set out to lower the stock prices since he perceived that speculation led stocks to be overpriced, causing damage to the economy. Diabetes And Types EssayAfter the crash, the Securities and Exchange Commission (SEC) was established to lay down the law and to punish those who violated the law. (1929) Also during the crash 4,000 banks failed, for the simple reason that the banks ran out of money. Four years later, Congress passed the Glass-Steagall Act, which essentially banned any connection between commercial banks and investment banking, to ensure that this would never happen again. The Federal Reserve and other banking regulators have softened some of the Acts separation of securities and banking functions by letting banks sell certain securities through affiliated companies. (1929)