The economic crisis that began in October 1929 is one of the most momentous historical events of the first half of the 20th century. The stock market of Wall Street underwent in those dates a thunderous fall. On Thursday, October 24, the Dow Jones dropped to one of its lowest levels since 1800 . The fall in share prices led to the ruin of thousands of investors. Relevant businessmen and small shareholders were affected equally. The companies and banks sank. Panic broke out among the population.
The police were forced to close the bag. Investors flocked to the bank offices, knowing the bankruptcy that was coming, closed their doors, unable to give consistent answers to their until that day ‘pampered customers’. The chaotic situation ended with the jump into the void of not a few powerful businessmen who, faced with their financial disaster, launched themselves from the skyscrapers that occupied their corporate headquarters. Millions of citizens were irrevocably condemned to unemployment. The stock market declines did not stop until January, when it hit bottom. The United States fell into the so-called Great Depression, which would last more than a decade.
It had unleashed what, with the passage of time, has been considered the biggest financial crisis in the history of capitalism. Its unprecedented echo reached the most dependent nations of the United States, such as Japan, Latin America and Europe.
We highlight the keys to the blackest day of the world economy
Background The end of the First World War gave way to a decade of economic dynamism in the US industrial and business sectors. The North American economy materialized a spectacular development, becoming the first world power. In a parallel way Japan did it in the East. The main nations depended economically on both, until there came a time when indebted Europe was forced to suspend its purchases. The agrarian and livestock sectors were the most affected. Some producers tried to stop the fall in sales by increasing production and yield. This led to a greater supply of products in the market and a consequent drop in prices. The US had nowhere to put its surplus.
Causes. In the midst of the prosperity of the ‘happy’ 20s, driving a speculative boom that led thousands of Americans to invest wildly in the stock market, signs of weakness began to emerge. At the end of the decade, brokers routinely lent huge amounts of money to small investors. Speculation was a currency in the stock market and the shares reached unlikely quotas. The economic bubble appeared on the scene. The average PER ( Price to Earnings Ratio , price ratio based on the company’s income) of the shares of the Standard & Poors index averaged well above the historical averages: 32’6 in September 1929.
the Dow Jones plummeted and panic-stricken investors flocked to sell
their shares in droves. Investors had gone into debt via credit, corporate profits stagnated and banks began to have problems. Forty banks went bankrupt, and the enthusiastic customers of yesteryear, fearful of losing their deposits, retire them hurriedly. The entities can not recover the loans granted to the stock speculators or those others invested in the industry in the long term. About one hundred thousand companies went bankrupt. Millions of workers were fired.
The government reaction . The Republican Hoover, at the helm of the government, considered the crisis to be temporary and considered it unnecessary for the State to intervene to recover the economic balance. His passivity is soon punished. In that year 25% of the active population was unemployed.
Four years later, in the presidential elections of 1932, citizens voted for the Democratic candidate Franklin D. Roosevelt. His government, through the program known as ‘New Deal’, applies energetic measures aimed at starting up the economy and helping the most needy, who are legion.
Roosevelt, the great democratic hope, gets after long efforts to relegate to oblivion (almost) that Thursday that still today remains in the memory of capitalism as a warning of what may happen …