Black Thusday: The Crash :: essays research papers

In the roaring 1920s, the United States bathed in previously unheard of prosperity. Industry and agriculture alike profited from the thriving economy. The Federal Reserve Board (known as "the Fed") practiced a policy of easy money, and consumer conf idence was high. Average income grew steadily throughout the decade and production soared. Levels of investment grew to new heights. At year's end in 1925, the market value of all stocks totaled $27 billion. By early October of 1929, that number had g rown to $87 billion. However, the economy began to slow down in 1928, and the trend continued in 1929. Agricultural prices slipped, a result of production surpluses and a downturn in business activity. In July of 1928, the Federal Reserve Board, took n otice and hiked interest rates in an attempt to slow investment to a pace more appropriate to the economic decline. Despite this and other warning signs, patterns of investment continued much as they had in the mid-20s, giving littl e recognition to the e conomic slowdown. The stage was set for a major market correction. On October 24, 1929, dubbed Black Thursday, the stock market crashed. Prices began to decline early in the day, triggering a selling panic in the New York Stock Exchange (NYSE). When trading closed the Dow Jones Industrial Average had fallen 9 percent and 12,894,650 shares of stock had changed hands, smashing the previous record of 8,246,742. Despite the crash, reports remained optimistic. Major New York banks united to buy up $30 million worth of stock in efforts to stabilize the market, and president Herbert Hoover announced that recovery was expected. Hoover's claims had little merit; the situation became bleaker during the next week. October 29 broke the now four-day old NYSE record for number of transactions: 16,410,035 shares changed hands in total. The market dropped 17.3 percent, confirming, and cementing, the permanency of the crash. The coming months saw no recovery. The crash in the market spelled disaster for the national economy. Corporations with heavy investments faced a sudden and almost insurmountable shock to their assets. Investing froze. As a result, the national economy fell into an unprecedented period of depression. Import spending dropped from $4.399 billion in 1929 to only $1.323 billion by 1932. The same period saw a sharp drop in exports as well. National income slipped lower each year from 1929 to 1932, and did not return to pre-depression levels until World War II.