1929 Wall Street Stock Market CrashShow Video Details ↓ Ann Douglas: A sense of there is no limit and that all this expansion, this excess, this elan, we're not really going to have to pay for it. Now of course that didn't turn out to be true. You can see the crash. Why do you think they called it the crash? I mean, it's really an airborne collapse metaphor. You can't crash if you've never left the ground and it's not like a crack up where you're on the ground and you collide into something else. Rather it's the plane fell. [silence] … John Steele Gordon: The 20s had been so prosperous in so many places, not in the countryside, the farming industry was in very bad shape in the 1920s, but certainly in the cities it was very prosperous. People were making fortunes on the stock market and then all of a sudden, poof, it went. Economists, very serious economists, had been saying that we'd reached a new level, a new plateau of prosperity in this country and we were never going to go back and then the crash happened. [silence] … Narrator: All through the summer of 1929, there had been ominous rumblings. For months, unemployment had been rising, automobile sales and department store revenues had fallen off sharply. Across the south and west, farms were failing in record numbers. And still on Wall Street, the delirious optimism continued, un-dimmed. On August 27, 1929, the Dow Jones average reached its all time peak. As an army of frenzied buyers descended on New York, desperate not to miss a single day's trading, swamping the hotels, camping out on the street in front of the stock exchange and in the tiny graveyard of trinity church on Broadway where Alexander Hamilton lay buried. [noise] John Steele Gordon: What caused the crash of 29 was excess speculation. What had happened was the American economy as a whole had begun to cool starting in 1928 and the Wall Street economy disconnected from the underlying real economy and became a speculative bubble and this fueled the speculation that just took off and took off and took off until again, one day, somebody woke up and said this has gone too far. There is an old story about Bernard Barooke that he had his shoes shined every morning by the same shoe shine boy and one morning the shoe shine boy gave him a stock tip. And Barooke went to his office, called his broker and said "Sell me out. When shoeshine boys are giving stock tips, it's time to get out." Narrator: As summer turned to fall, the mood changed. As the stock market dipped, then rose, then lurched downwards again, investors grew increasingly uneasy. In September, an economist named Roger Babson sent a wave of fear rippling through Wall Street, when he warned that sooner or later, a crash is coming and it may be terrific. But most experts brushed away any concerns. Stock prices, one man declared, have reached what looks like a permanently high plateau. [silence] And then the bottom fell out. On Wednesday, October 23, 1929, the first waves of panicky selling began to drive down the price of blue chip stocks like Westinghouse and General Electric. The following morning, the fear turned to panic and brokers began unloading margin accounts at record speed. Stock prices plummeted sickeningly across the board spurring the rush of sell orders from terrified speculators still more. As anguished shrieks rose up from the floor of the New York Stock Exchange, the visitor's gallery was cleared. In less than 2 hours, nearly 10 billion dollars invested in stocks was simply wiped out. [silence] … … … Outside on the street, crowds massed 6 deep in front of the stock exchange while hundreds more stood in shocked silence on the steps of Federal Hall. Newspapers would later try to describe the uncanny murmuring sound that echoed off the stone facades of the financial district that morning. It was a collective moan of horror and grief and stunned disbelief rising up from thousands of ruined, frightened men. [silence] The biggest crowds gathered outside the House of Morgan, desperately hoping for a miracle. Cheers broke out when word came that a consortium of bankers have agreed to pump hundreds of millions of dollars into the stock exchange to shore up the faltering market. Word spread that, once again, the day had been saved by the House of Morgan. But the day had not been saved. On Friday, with the market apparently stabilized, the banks withdrew their funds. The following Tuesday, October 29th, 1929, known forever after as Black Tuesday, another tidal wave of selling hit the exchange. And this time no one came to the rescue. Man: Nothing could stop it because people wanted out. And this was in the fall and most crashes tend to be in the fall and I think it, again, it's human psychology, you tend to be more cautious in the fall. I mean the speculations of summer that seem so brilliant then suddenly when the chilly winds of October come you wonder if they are such a good idea and you try to get out. If too many people do that at once it causes the market to drop which causes more people to want to get out and then suddenly the snowball rolls down the hill. Narrator: Hour after hour, the market continued its descent into chaos and pandemonium as stock prices simply collapsed under the torrent of panicked selling. And desperate brokers fought and screamed and trampled one another to get out. John Steele Gordon: 16 million shares traded that day which seems like nothing today because we trade 16 million shares in the first 5 seconds of the business day. But the trading record set on the day of the crash, the 16 million shares, was not bested until 1969. It was 40 years before the New York Stock Exchange traded more shares than it traded on the day of the crash. The tickers did not stop running until a quarter of eight when the market had closed at 3:30 I guess. [silence] Narrator: In the worst single day in the history of the New York Stock Exchange, the market lost $14 billion in value, bringing the week's lose to more than $30 billion, 10 times more than the entire annual budget of the federal government, and far more than the United States had spent during all of World War I. Worst hit in the short run were the thousands of small investors who, believing that everyone could be rich, had bought stock on margin, sometimes borrowing as much as 90% of its book value. In a matter of hours, in some cases minutes, they had lost everything. Their life savings, their houses and their dreams. [silence] Financiers who had not been wiped out tried to put a brave face on things insisting there was no cause for alarm. "Prudent investors are now buying stocks in huge quantities," John Jacob Raskob told the New York Times, "and will profit handsomely when this hysteria is over." Wednesday October 30, 1929. Mr. Raskob was asked if he believed that the decline in the stock market would have great effects on business. He answered that he did not believe the effects would be other than temporary, lasting probably 2 or 3 months and that he did not believe that the effects would be drastic in other than luxury industries, the New York Times. But others feared the worst. The present week, one newspaper editor declared, has witnessed the greatest stock market catastrophe of all times. It would take a decade and a half for the American economy to fully recover. John Steele Gordon: I think the reason the crash lives on in the American folk memory, although there aren't that many people alive today who were adults when the crash happened almost 70 years ago now. But what followed the crash, the great depression which permanently scared the American psyche, and we remember the crash as the beginning of the great depression although in fact the two had nothing to do with each other or very little. But that's why I think the crash became such a benchmark because it was this very sharp line between the prosperity and the giddy cocktail party of the 1920s and the awful depression of the 1930s with the bread lines and apple sellers and the riots and what have you. |