what caused the Great Depression?
In: Economics
October 24, 1929, aka “[Black Thursday](https://www.britannica.com/event/Black-Thursday),” the first day of the [stock market crash of 1929](https://www.britannica.com/event/stock-market-crash-of-1929), a catastrophic decline in the US [stock market](https://www.britannica.com/money/stock-exchange-finance) that ended up crashing the global markets.
Many of the stocks being traded had been purchased on margin—that is, with a cash payment representing only a small fraction of the stocks’ actual value, the rest of the purchase price being covered by a loan from the stockbroker or investment company, with the stocks themselves serving as collateral. In addition, the increased demand for American manufactured goods in the years immediately following World War I eventually led to overproduction in various sectors, causing many businesses to lose money and their stock prices to fall.
As Black Thursday unfolded, several major banks and investment companies bought up great blocks of stock in a briefly successful effort to stem the panic of investors. At the end of the day, the market closed only a few percentage points down, and on Friday it recovered very slightly. Wall Street’s calculated show of confidence ultimately failed, however, as nervous investors resumed selling stocks the following Monday and Tuesday (later known as [Black Monday](https://www.britannica.com/topic/Black-Monday-1987) and Black Tuesday), when prices declined by a further 12.8 percent and 12 percent, respectively. As stocks declined in value, brokers and investment companies for stocks sold on margin required more money from buyers to compensate for the loss of collateral, and buyers themselves raced to sell stocks to minimize their losses. Black Tuesday is generally considered the last day of the stock market crash of 1929.
Latest Answers