MOSCOW, October 24 (RIA Novosti) - October 24, 2014, marks the 85th anniversary of Black Thursday, the New York stock market crash that triggered the Great Depression – one of the worst economic collapses in history.
The Great Depression was a protracted slump in the world economy that lasted from October 1929 to 1940. The recession hit Western countries particularly hard but spread around the world. Though the term itself is used in relation to the United States, the Great Depression was in fact a global economic crisis.
In October 1929, 1 percent of Americans were considered to receive extremely high incomes and 42 percent, very low. About 100 major corporations controlled half of corporate capital in the United States, while banks often promised from 4 to 5 percent returns on deposits per day.
Since the mid-1920s, the US stock market had basically been a bull market. While in 1923 the Dow Jones average stood at 99 points, it reached 380 in 1929. Bank credit was widely available with favorable repayment rates and many borrowed in the hope of easily servicing a loan in the future. Speculators also took out loans in order to invest in stocks. Industrial companies reported profits and preferred to invest in product development, something that compelled speculators to buy up their paper. But it became clear in 1929 that many stocks did not guarantee high dividends, while profit forecasts of many corporate issuers proved exaggerated. The issuing companies faced falling sales while their stocks appreciated. All of this laid the groundwork for financial and development-related manipulation.
On October 24, 1929 – the day known as Black Thursday – pandemonium broke out on the New York Stock Exchange as stock prices collapsed following the unprecedented sale of 12,894,650 shares. By midday, five top executives representing National City Bank, Chase National Bank, Guaranty Trust Company, Bankers Trust Company and J.P. Morgan assembled at J.P. Morgan"s headquarters to analyze the stock market situation. Their conclusion was that many quotations did not reflect the true state of affairs and there was no cause for panic. This statement had a reassuring effect on major corporate stock holders, leading to a rise in many quotations toward the end of the day. But they never reached previous levels. In his address to the American people next day President Herbert Hoover said that the national economy rested on a firm foundation and that the stock exchange stampede was technical in origin.
On October 29, 1929, 650,000 US Steel shares were dumped on the market within the three minutes of trading. They were trading at $186 a share the day before, three minutes later no one wanted them, even at $179. Westinghouse, General Motors, Paramount, Fox, Warner Bros and others collapsed after US Steel. Attempts by major banks to stop the depreciation of stocks were to no avail. By the end of the day, 16,383,700 shares had been dumped, with 880 corporate issuers losing almost $9 billion, or twice the amount of the national money supply at the time, which triggered the Great Depression. On September 1, the total value of stock traded on the New York Stock Exchange was almost $90 billion, falling to about $16 billion by July 1932.
