stock market crash of 1929

during the summer of 1929, the stock market reached record highs. there were hints of problems ahead, but few people paid attention. for one thing, too many people's wealth depended on buying stocks on margin, creating a debt that would be hard to repay if stock prices fell. another hint was the slowdown in buying-most families had already bought a car, furniture, and an array of household appliances, and did not need any more. but factories continued to produce goods at record rates, creating huge inventories of unsold products that just sat in warehouses and on store shelves. also, farms continued to fail at an alarming rate as prices dropped and money stopped coming in.

in the fall of 1929, the prices of stocks dropped sharply, then recovered—until october 29, 1929, when they collapsed. stocks that had sold for $90 a share or more were suddenly almost worthless. investors lost nearly $8 billion on that one day.

once people lost confidence in the stock market, it touched off a chain reaction. brokers demanded that investors pay their margin loans, and banks asked for the money they had loaned the brokers. millions of people withdrew their money from banks. this "run" on the banks caused hundreds of banks to run out of cash and forced them to close temporarily. in the aftermath of the stock market crash, there were stories about people who jumped out of windows and killed themselves—which did happen, although the stories often exaggerated the numbers of victims.