Most people mark the beginning of the Great Depression with a day known as Black Tuesday.
What happened on Black Tuesday? Why is that day so important?
A corporation is a business which individuals buy stock in. The more stock one owns, the
larger share of the corporation that person has. These stocks are bought, sold, and traded
on the stock exchange (the American Stock Exchange is located on Wall Street in New
York City). The success and failure of these corporations is gauged by The Dow Jones Industrial
Average. The Dow Jones is an index which shows how large corporations are performing on the
stock exchange. If the Dow Jones average goes up, this means that corporations are prosperous,
and their shareholders are making money. If the Dow Jones average goes down, this means
that many of the corporations are facing economic hardships.
Throughout the 1920s, the Dow Jones Industrial Average had steadily gone up, along with the
unprecedented economic growth in the United States. In fact, it had continued to rise
for nine years in a row. However, in 1929, the stock market saw major fluctuations. Throughout
the year, there were ups and downs as investors bought and sold in sporadic fashion. During
the summer months, some economic analysts predicted a major slump, but most did not
heed this warning. Thursday, October 24, 1929 was the first day
that saw a dramatic shift. When the stock exchange on Wall Street opened, there was
heavy trading, with many choosing to sell their stocks and get out of the market. This
caused an 11% drop in the value of the market. A group of leading bankers even held a meeting
to see if they might be able to find a solution to the panic that had ensued that day.
Monday, October 28, saw even more activity. The Dow Jones Industrial Average spiraled
further downward. This meant that many investors desired to sell their stock, but no one wanted
to purchase those stocks for the prices they were being sold at.
The next day, Tuesday, October 29, 1929, was the day that will forever be remembered as
Black Tuesday. That day, the Dow Jones Industrial Average fell 30 points, losing 12% of its
value. More than 16 million shares were traded, a record that would stand for more than forty
years. With so many investors looking to dump their stocks, hysteria ensued, and thousands
of people lost their personal fortunes. The stock market had lost more than $30 billion
in value over the course of two days, and the event became known as the Stock Market
Crash. The stock market continued to fall even lower
over the next two weeks before finally stabilizing in mid-November. June of 1930 saw another
slump in the market, and yet another downward spiral occurred in April of 1931.
Investors had lost faith in the American economy. The decline in stock prices caused bankruptcy
and business closures for many corporations. Expansion and innovation became more difficult
as no one wanted to invest their financial capital and take risks. As a result, it would
take more than a decade for the US economy to recover. This is why Black Tuesday is considered
the event that started the Great Depression.