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When the Stock Market crashed on October 29,1929 people referred to it as Black Tuesday, this was the beginning of the Great Depression.
On October 29, 1929, the New York Stock Exchange closed down 12 percent for the second straight day, signaling the end of the bull market of the 1920s and the beginning of the Great Depression. The stocks on the market dropped dramatically which saw investors scrambling to sell their stocks. Businesses in the 1920s were buying more machines and hired extra workers. They believed that the demand for their goods would steadily increase. Little did they know there were signs that the economy was not healthy. Many businesses found that they had began stockpiling their products. There was a lesser demand for these products. People were recklessly borrowing money on credit from banks to buy high-priced stocks. Companies had their stocks rise dramatically and people wanted to get into the action. They were intending to sell the stocks for a profit and repay lenders when they received their money. Banks were giving out money because they were optimistic about the future, but this unfortunately lead most major banks to bankruptcy. The country did not have enough money to pay for other expenses.
Black Tuesday refers to October 29, 1929, when panicked sellers traded nearly 16 million shaares on the New York Stock Exchange (four times the normal volume at the time), and the Dow Jones Industrial Average fell -12%. Black Tuesday is often cited as the beginning of the Great Depression.
Black Tuesday was October 29, 1929, the day the New York Stock Exchange crashed. This means that the prices for stock were too high, far higher than they were really worth. Then they fell sharply. People who had unwisely borrowed money to buy high-priced stocks (intending to sell the stocks at a profit and repay lenders), went bankrupt. Black Tuesday marked the beginning of the Great Depression, a period of economic hardship in the United States lasting from 1929 to 1939.
The stock market was only one cause of the Great Depression, however. Unequal income distribution was another problem. While businesses showed great profits during the 1920s, workers got only a small portion of this wealth in their low wages. People who had small incomes therefore bought merchandise on credit. Advertisers pushed them to do so with the slogan "Buy now, pay later." Many consumers accumulated so much debt that they could no longer purchase products, leading to a slowing of manufacturing because there was a backlog of merchandise. During the 1920s American farmers in the Midwest had been suffering from drought conditions. Others had geared up for high production, but after the end of World War I (1914–18) they found that the international market was overstocked and prices fell so low that they could not make a profit on their crops. The banking industry also made mistakes in too freely lending money, especially to foreign countries trying to rebuild after the war. These countries had trouble repaying their debts. To make matters worse, the United States (and other industrialized countries) charged high import taxes on goods that other countries offered for sale. These taxes prevented countries from selling the goods they needed to earn the money to repay loans from U.S. banks.
Further Information: Burg, David F. The Great Depression. New York: Facts On File, 1996; Davies, Nancy M. The Stock Market Crash of 1929. Parsippany, N.J.: Silver Burdett, 1994; Farrell, Jacqueline. The Great Depression. San Diego: Lucent, 1996; Feinberg, Barbara S. Black Tuesday: The Stock Market Crash of 1929. Brookfield, Conn.: Millbrook, 1995; Freeman, David K. The Great Depression in American History. Springfield, N.J.: Enslow, 1997; Nardo, Don. Great Depression. San Diego: Green-haven, 1998.
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