The stock market crash. From 1925 to 1929, the average price of common stocks on the New York Stock Exchange more than doubled. Rising stock values encouraged many people to speculate--that is, buy stocks in hope of making large profits following future price increases.
Stock values dropped rapidly on Oct. 24, 1929, now known as Black Thursday. Most stock prices remained steady on Friday and Saturday. But the next Monday, stock prices fell again. Then, on Tuesday, October 29, stockholders panicked and sold a record 16,410,030 shares of stock. Thousands of people lost huge sums of money as stock values fell far below the prices paid for the stock. Banks and businesses had also bought stock, and many lost so much that they had to close. Stock values fell almost steadily for the next three years.
The Great Depression differed in both length and harshness from previous depressions in the United States. In earlier depressions, business activity had started to pick up after one or two years. But from October 1929 until Franklin D. Roosevelt became President in March 1933 the economy slumped almost every month. Business failures increased rapidly among banks, factories, and stores, and unemployment soared. Millions of people lost their job, savings, and home.
From 1930 to 1933, prices of industrial stocks fell about 80 percent. Banks and individuals with investments in the stock market lost large sums. Banks had also loaned money to many people who could not repay it. The deepening depression forced large numbers of people to withdraw their savings. Banks had great difficulty meeting the withdrawals, which came at a time when the banks were unable to collect on many loans. Between January 1930 and March 1933, about 9,000 banks failed. The bank failures wiped out the savings of millions of people.
Excerpt from the "Great Depression" article, The World Book Encyclopedia © 1999