What You Didn’t Know About Black Tuesday And The Start Of The Great Depression
Bankrupt investor Walter Thornton tries to sell his luxury roadster for $100 cash on the streets of New York City following the 1929 stock market crash. (Getty Images)
You probably remember from high school history class that the Great Depression of the 1930s was caused by the 1929 stock market crash, but did you know that the stock market did not crash in a single, one-day explosion? It occurred over a four-day period, culminating with Black Tuesday, the single worst day in the history of the stock market. Here’s what you didn't know about Black Tuesday.
The New York Stock Exchange. (theatlantic.com)
What Is The Stock Market?
Ideally, business owners have access to a limitless supply of cash that they hoard in a Scrooge McDuck--like vault, but most have to fund new ventures via more conventional means. They sell shares, a small percentage ownership of the company, as a way to get investment dollars to grow and expand their business. The stock market is a like an auction house for the buying, selling, and trading of these shares, the value of which is determined by the worth of the company. If a company is doing well, the value of its shares increases. Investors make money in the stock market by identifying businesses with potential for growth, buying their shares when the price is low, and selling at a profit when the shares' value goes up. Since the stock market is essentially just a marketplace of various companies, it's inextricably tied to the U.S. economy.
Panicked investors sold off their stocks. (business.financialpost.com)
What Was The 1929 Stock Market Crash?
In October 1929, the stock market began to decline after a lengthy period of impressive gains, and investors panicked as the value of their shares plummeted. They tried to sell their shares before they became worthless, flooding a market that had very few buyers poking around. October 24, 1929 became known as Black Thursday, marking the beginning of a four-day collapse of the stock market that ended on October 29, 1929, or Black Tuesday.
Billions of dollars were lost on Black Tuesday. (history.com)
What Happened On Black Tuesday?
On Black Tuesday, investors sold a record 16.4 million shares at a loss of $14 billion, or about $206 billion in today's money. Overall, investors lost $30 billion in the four-day collapse, more than the U.S. spent on World War I and about 10 times the federal budget for 1929. It was so bad that the stock market didn't rebound to its pre-crash numbers until 1954, a quarter of a century later.
Millions of people were out of work. (worldhistory.us)
What Was The Great Depression?
After the stock market crashed, individuals saw their net worths bottom out and businesses were forced to close their doors. The economic panic spurred banks to call in their loans, demanding immediate repayment on the threat of foreclosure. When cash-strapped families couldn't pay off those loans, they had to give up their homes and automobiles, but even that wasn't enough to save the banks. They, too, went out of business, taking people's life savings with them. The dearth of companies left in business meant that a lot of people suddenly found themselves unemployed, with few job openings to go around.
Shanty towns were called "Hoovervilles." (oldphotoarchive.com)
Everyone Blamed Hoover
Bitter and desperate, many of those affected by the crash blamed then-president Herbert Hoover for the economic turmoil in the country. Homeless families often congregated in shanty towns they called "Hoovervilles." They lined up at soup kitchens for meals of "Hoover stew" or feasted on small rabbits sarcastically nicknamed "Hoover hogs." People who didn't lose their cars to the Great Depression often couldn't afford to repair them or fill them with fuel, so they resorted to buying mules to pull their cars, turning them into "Hoover wagons." Even the most desperate people who had only old newspapers to shield themselves from the elements joked that they were using "Hoover blankets."
Soup kitchens were often the only way people could eat. (thebalance.com)
Al Capone, Good Guy?
As if things weren't dramatic enough, this was all happening in the midst of Prohibition, so obviously, Al Capone got in on the action at one point. He was known to take the occasional break from gangstering to boost his public image with some charity, and during the Great Depression, he opened a soup kitchen in Chicago to serve people from his community who were down on their luck. Soup kitchens were not only found in Chicago, of course---they popped up all across the country. For millions of Americans, the soup kitchen was their last hope to fight off starvation.
Suicide rates spiked among financial investors after Black Tuesday. (moma.org)
Desperation And Despair
Immediately following Black Tuesday and the collapse of the stock market, a wave of suicides hit New York's financial district. Investors who lost everything in the crash threw themselves from bridges and balconies in record numbers. One New York City hotel clerk was even reported to ask new guests "Do you need a room for sleeping or for jumping?"
Shirley Temple exemplified the optimism of the time. (youtube.com)
Optimism For The Future
Americans can't be kept down for long. They knew that the Great Depression was just temporary and that brighter days were ahead, and this sense of optimism can be felt in the pop culture of the 1930s. Bubbly Hollywood stars like Shirley Temple helped to lift the spirits of the downtrodden, and the upbeat song "Happy Days Are Here Again" was ironically but helpfully recorded shortly after Black Tuesday.
Neighbors helped save each others farms. (offthegridnews.com)
Neighbors Helping Neighbors
Approximately 750,000 farms were foreclosed upon between 1930 and 1935. Most of these were sold on the auction block or at sheriff sales, but on auction day, neighbors often helped bankrupt farm owners by forcing a "penny auction." They infiltrated the auction and kept the bids low---often pennies or dimes---so that the farmer could buy back his own farm for mere pocket change.
FDR started programs to put Americans back to work. (wsj.com)
Although Franklin D. Roosevelt instituted a number of programs designed to put people back to work when he was elected president in 1933, the real relief from the Great Depression came when the United States entered World War II. More and more jobs opened up in manufacturing facilities to help the war effort, ushering in a new and improved unemployment rate that would soon reach unprecedented lows. We're not saying that starting a war is an awesome quick fix for jumpstarting an economy; we're just not not saying that.