The 1929 stock-market crash was a sharp collapse after years of rising share prices, with severe losses on October 28 and 29. Margin borrowing amplified investors’ exposure, while the Federal Reserve’s efforts to ease pressure on banks did not stop prices from falling. The crash was a major event in the longer economic downturn, but it did not by itself explain the entire Great Depression.
What led to the 1929 crash?
According to Federal Reserve History, the Dow Jones Industrial Average rose six-fold, from 63 in August 1921 to 381 in September 1929. It closed at its peak of 381.17 on September 3, 1929. More Americans had access to stock investment, and borrowing made it possible for some investors to buy shares with only a portion of the purchase price in cash. A typical arrangement described by Federal Reserve History involved putting down about 10 percent and borrowing the remainder, with the shares serving as collateral; practices varied.
| # | Preview | Product | Price | |
|---|---|---|---|---|
| 1 |
|
American Experience: The Crash of 1929 | $18.81 | Buy on Amazon |
| 2 |
![Today You Die [DVD]](https://m.media-amazon.com/images/I/51t-2kWa1wL._SL160_.jpg)
|
Today You Die [DVD] | $16.99 | Buy on Amazon |
| 3 |
|
Golden Twenties | $3.99 | Buy on Amazon |
| 4 |
|
Crash Test: A Novel | $38.14 | Buy on Amazon |
That borrowing magnified potential gains as prices rose, but also made losses more damaging when prices fell. Federal Reserve leaders were concerned about speculative credit and disagreed about how to address it. The New York Fed’s discount rate reached 6 percent in August 1929. Federal Reserve History describes the rate decision and its international effects under the gold standard as part of the context, not as a single proven cause of the crash.
What happened on Black Monday and Black Tuesday?
After prices grew volatile in September and October, a group of bankers that included Charles E. Mitchell tried to restore confidence by buying shares at high prices. The effort failed as selling intensified. The steep decline unfolded over consecutive sessions:
#1 Best Overall
| Date | What happened |
|---|---|
| October 28, 1929 | On Black Monday, the Dow fell nearly 13 percent. |
| October 29, 1929 | On Black Tuesday, the Dow fell nearly 12 percent. |
| By mid-November 1929 | The Dow had lost almost half its value. |
These figures are reported by Federal Reserve History. They describe the Dow’s market losses, not a percentage decline in total national wealth, output, or household income.
How did the Federal Reserve respond?
The falling market created pressure beyond share prices. Funds moved into New York commercial banks, which also held stock-market loans, and the resulting deposits, withdrawals, lending, and check-clearing flows strained reserves. The New York Fed responded by buying government securities, speeding up discount-window lending, lowering its discount rate, and assuring banks that it would supply needed reserves.
Rank #2
Federal Reserve History says these steps helped banks near the center of the crisis remain open, even as stock prices continued to collapse. The response eased immediate bank-liquidity pressure; it did not reverse the market decline.
Did the 1929 crash cause the Great Depression?
The crash and the Great Depression were related, but they were not the same event. Federal Reserve History says the crash’s impact faded within months and recovery seemed possible by fall 1930. Banking panics that began in late 1930, followed by further national and international financial crises, prolonged and deepened the downturn.
Recommended Free Tools
Rank #3
The international setting mattered too. The U.S. crash coincided with economic trouble in Germany and financial difficulties in France and Great Britain. The U.S. Department of State account notes that gold-standard commitments made economies less flexible in responding to shocks. Together, these accounts point to a multi-stage crisis, not a simple claim that the October crash alone caused the whole Depression.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How much did the market fall, and when did it recover?
Federal Reserve History reports that the Dow closed at 41.22 on July 8, 1932, 89 percent below its 1929 peak. Its chart description says the Dow did not return to the 1929 high until November 1954. These are Dow index figures, not measures of every investor’s individual losses.
Rank #4
FAQ
What was Black Tuesday?
Black Tuesday was October 29, 1929, when the Dow fell nearly 12 percent, according to Federal Reserve History. It followed Black Monday, October 28, when the Dow fell nearly 13 percent.
Did everyone buy stocks on margin?
No. Borrowing to buy shares was one way investors gained exposure, and Federal Reserve History describes a typical down payment of about 10 percent in some arrangements. That should not be taken to mean every investor used the same terms or borrowed to invest.
Did the Federal Reserve stop the crash?
No. The New York Fed took steps to supply reserves and help banks manage short-term funding pressure, but stock prices continued to fall.
How long did the Great Depression last?
Federal Reserve History dates the Great Depression from 1929 to 1941. It describes a downturn marked by the crash, later banking panics, and national and international financial crises.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
