![]() 16 level until January 1989.īy the second anniversary of the crash, the Dow was at 2,683, still some 60 points below the then record high of 2,746.65 set on August 25. The blue-chip index spent the rest of the year trading between 1,776 (some 40 points above its Black Monday close) and 2,014 (some 200 points below its close the day before the crash) and ended 1987 with a small gain. By the end of the month, the Dow was some 15 percent above the Black Monday close. In 1987, after a turbulent eight days, the market appeared to have stabilized. On an economic level, business bankruptcies and unemployment soared as a result of Wall Street’s collapse. Recovery from the 1929 crash, however, was long and - given the onset of the Great Depression, which many historians consider an unrelated event – painful. “I call it a ‘crashette’ because it didn’t produce a long-standing bear market,” quips Robert Stovall, who started on Wall Street in 1953 and is now managing director at Wood Asset Management. The economy didn’t fall into recession until the third quarter of 1990, after oil prices had spiked because of Saddam Hussein’s invasion of Kuwait. However, after 1926, house prices fell leaving some Americans owning houses that were worth less money than what they had paid for them.Broadly speaking, the recovery from the 1987 crash was sure and swift and continued the greatest bull market in history, one that finally ran its course sometime in 2001. House prices increased a great deal in the early 1920s. Many of these businesses went into financial difficulties when people failed to pay their debts. As a result, they owed money to shops and credit companies. Debt increasingĪ lot of Americans bought goods on hire purchase. Many banks had already closed even before the crash, leaving thousands of customers with no money at all. There were very few large banks in America, but there was a huge number of small ones which were unstable and did not have the financial resources to cope with the rush for money when the Wall Street Crash happened. The laissez-faire policy of the Presidents meant there were not enough safeguards in the economy, especially on the banks and the stock market. This meant American goods were too expensive to buy in Europe and, as a result, there was not much trade between America and Europe. However, the Fordney-McCumber Tariff Act 1922 had led to European countries imposing tariffs on American goods. ProtectionismĪmerica tried to sell its surplus goods in Europe. Mechanisation also caused unemployment in these sectors. Decline in traditional industriesĬoal mining, shipbuilding and railroads were either stagnant or in decline. ![]() This meant workers were laid off, which reduced demand for goods even further. Also, people in agriculture and the traditional industries, who were on low wages, could not afford consumer goods. ![]() People who could afford items, such as cars and household gadgets, had already purchased them. Mass production methods led to supply outstripping demand. Overproduction and underconsumption of consumer goodsīy the end of the 1920s, there were too many consumer goods unsold in the USA. Sharecroppers in the south, who were mostly black Americans, were often evicted when the white-owned farms had financial problems. In 1924, 600,000 farmers lost their farms. Thousands of farmers fell into crippling debt, could not pay their mortgages and so became unemployed after having to sell their farms or being evicted. There was also less demand from Europeans for food from America because they were growing their own crops and there was a tariff war. However, the demand for grain fell in America because of Prohibition and changes in tastes in food. Long term reasons for the crash Overproduction and underconsumption in agricultureĪs farming techniques improved, farmers started producing more food. On Black Tuesday, 29 October, 16 million shares were sold on the stock market in Wall Street and the economy collapsed completely.īy 1930, America was in the Great Depression. The economic prosperity of the 'Roaring Twenties' came to an end in October 1929.
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