Why the Stock Market Crashed in 1929

by Jason Knapfel ; Updated July 27, 2017
The 1929 market crash made rich people poor in a matter of days.

The stock market crash of 1929 was the biggest financial disaster in American history. It ushered in the Great Depression and a dark period of struggle for the country. But, what caused the stock market crash?

Causes

There were several reasons for the 1929 stock market crash: overvalued stocks, low margin requirements (10 percent), interest rate hikes and poor banking structures.

The Facts

The stock market crash took place over a period of two weeks in October 1929. with three days referred to as Black Thursday (Oct. 24); Black Monday (Oct. 28); and Black Tuesday (Oct. 29).

History

In the decade before the crash, the stock market boomed, with stocks more than quadrupling in value.

Results

During the week beginning Oct. 28, 1929, stocks lost a total of $30 billion in value.

Reforms

In the wake of the stock market crash of 1929 and subsequent Great Depression, agencies and legislation were enacted to avoid future financial collapses: The Securities and Exchange Commission (SEC), The Glass-Steagall Act, which separated commercial and investment banking; and the Federal Deposit Insurance Corporation (FDIC) to insure individual bank accounts for up to $100,000.

About the Author

Jason Knapfel started his editorial career as a graphic designer and production editor for American Media. In 2000, he began a six-year stint as senior editor at eDiets.com, a leading online diet and fitness plan provider. Since 2007, Knapfel has worked as a content consultant.

Photo Credits

  • Image by Flickr.com, courtesy of woodley wonderworks