New York Stock Exchange: Rise, Fall, and the Great Depression

The Rise and Fall of the New York Stock Exchange

The first manifestation of crisis in the stock market began with the belief that prices would start to decrease. Consequently, some investors began to list their shares in the hope of making profits. However, a massive offering of shares soon followed, causing prices to plummet. This massive stock offering led to a collapse in value, resulting in the infamous Black Thursday (October 24, 1929). Panic gripped investors as 13 million shares were offered for sale without finding a buyer. This marked the crack of the New York Stock Exchange. From that moment, the desire to buy as soon as possible to earn more gave way to selling as soon as possible to lose as little as possible.

The falling value of shares ruined many investors. Banks began to demand the cancellation of loans acquired to purchase those shares, prompting another wave of sales. This resulted in Black Tuesday (October 29, 1929), and the road to the Great Depression had begun.

Causes of the Great Depression

Several factors contributed to the Great Depression:

• Industrial Overproduction: A surplus of goods led to decreased demand and falling prices.
• Liquidity Crisis: A lack of monetary resources made it difficult to meet financial obligations and pay debts.
• Consumption Decline: Rising unemployment and a pessimistic outlook on the economic future led to reduced consumer spending, further aggravating the situation.

These causes—overproduction, lack of money, and falling consumption—transformed a market crisis into an economy-wide downturn within months. The banking system was one of the first sectors to be hit. Firstly, the stock market collapse meant debtors could not repay their loans. Secondly, most banks had accepted shares as collateral for loans. Fear of bank failures caused people to flock to withdraw their money. However, financial institutions were unable to meet this demand due to a lack of monetary resources. This triggered a severe banking crisis, leading to the bankruptcy and disappearance of over 400 banks. Millions of American families were ruined and lost everything they possessed.