Stock Market Crash – 80 years ago

It was 80 years ago that the stock market crash of 1929 pushed a fragile economy over the edge. On Oct 28th the stock market dropped a little less than 13% and then the next day (called Black Tuesday) it dropped another 12%. Why was that a problem? Many people were buying stocks by borrowing money. If you wanted to buy $10,000 worth of stock you only had to have $1,000 of cash and could borrow the rest. So when the stocks dropped in those two days, a person owed more than their worth. That made stock investors instantly bankrupt.

Housing prices had already been dropping for a few years before the stock market crash. The crash made some banks close. People became afraid of losing their deposits and took their money out of banks helping other banks to close. People that had suffered losses in the stock market or by losing bank deposits cut back their spending which caused industries to cut jobs. Unemployment increased in the US to a high in 1933 of 25%. The failing US economy dragged the rest of the world into depression. The “Great Depression” lasted through most of the 1930s.