The Stock Market Crash Of 1929 And The Great Depression
Stock prices are based on the perceived value of the company or investment they represent. By 1932, the index of stock prices had fallen from a 1929 high of 210 to a low of 30. Stocks were valued at just 12 percent of what they had been worth in September 1929. Stock marketing crashes occur because of a complex network of reasons including external economic factors as well as psychological crowd behavior, either of which can trigger the other into inducing a crash.
There is no numerically specific definition of a crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of several days. October 24 (known as Black Thursday) was the first in a number of increasingly shocking market drops. We are told, over and over, that the free market is a sort of natural wonder that guides the economy without need for government interference. Generally, the economy was booming and it’s reflected in massive new investments in the share market.
Demand for goods declined because people felt poor because of their losses in the stock market. Bear markets are a period where declining stock prices occur over a period of time, sometimes months or years. The New York Stock Exchange also make sure that this would never happen again by implementing the uptick rule. The average NYSE trading volume in period from the middle of September 2007 until now is about 7 billion shares per day. They have happened in every part of the world where there was an industrialized market economy.
On October 29, 1929, also known as Black Tuesday, the stock markets plummeted and continued to decline unrelentingly for a month. As stocks climbed in price, many Americans believed that they could amass a tremendous fortune, even if they owned only one or two shares of stock.
Unfortunately for them, beginning in September 1929, the stock market began to decline in value as larger investors realized that the stocks were inflated in price. When it happened depends on the current political and economical factors affecting the stock market and how fast the investor could be reassured in the coming stability. Prior to the Great Stock Market Crash, the United States was enjoying a sustained period of economic growth. Many investors became convinced that stocks were a sure thing and borrowed heavily to invest more money in the market. The government decided to take preventive measures for the future to avoid a recurrence of a similar crash. Some countries put a temporary halt to their stock market trading because of this global financial crisis. This was short lived and it crashed again entering a bear market and reaching its lowest point in July of 1932. Many companies and banks also turned to the stock markets for their investments.