Black Tuesday
The Stock Market Crash of 1929
Leading Up to the Crash
During the 1920s, Canada enjoyed an
economic ‘boom’ where the standard of living
increased.
This was the ‘Roaring 20s’
The thriving economy, however, was actually
built on shaky grounds.
The good times were a result of
easy credit (people could get loans easily) and
the need to supply Europe after WWI.
By 1928, there were economic indicators that
pointed to a financial downturn.
These included:
Declining wheat prices
Declining newsprint prices
Overstock of many major export products
Black Thursday
The New York Stock
Exchange (NYSE) was the
largest stock exchange in the
world.
People thought the NYSE
had reached permanently
high levels.
But on Thursday, October
24, 1929, a record 12.9
million shares were sold. Crowd gathering on
wall street.
The leaders of the stock exchange met and
attempted to stop the chaos and panic that
was happening on the NYSE.
They succeeded in stopping the slide that
day, but only temporarily.
Newspapers across the country dramatized
the events on the stock exchange.
This lead to more and more stock holders
panicking and selling their stocks.
Floor of the NYSE just before the crash
Black Tuesday
Finally, on Tuesday, October 29, 1929, over
16 million shares were sold on the NYSE.
The value of stock market shares decreased
by $30 billion.
Thousands of people lost their life savings.
The market did not return to pre-1929 levels
until 1954!
"They roared like a lot of lions and tigers.
They hollered and screamed, they clawed at
one another’s collars. It was like a bunch of
crazy men. Every once in a while, when
Radio or Steel or Auburn would take another
tumble, you'd see some poor devil collapse
and fall to the floor."
Stock exchange guard on the day of the Crash
Fallout from Black Tuesday
The result of Black Tuesday was felt
throughout the world.
Governments, industries, and banks stopped
spending, investing, lending, and expanding.
The world entered a period of economic
stagnation (def. a state of inactivity).
The period of time following the crash is
known as the Great Depression.
The Beginning of the Great
Depression
Was the Stock Market Crash of 1929 the cause of the
Great Depression?
No, it wasn’t!
Most historians agree that the crash was inevitable,
and was a symptom of a dangerous financial
situation that had been building for years.
The Great Depression was a long, bleak period of
history for the world and, in particular, Canada.
Some people say of all the countries in the world,
Canada was hit the hardest.
Easy Credit
After WWI, companies needed money to
convert to peace-time production. They
raised funds by going into debt by borrowing
from banks, selling bonds, or offering shares.
Companies and consumers borrowed heavily,
which meant any reduction in sales or income
made it difficult to make payments.
When Black Tuesday occurred, lenders
began demanding loans be repaid.
People and companies went broke.
Lack of Financial Regulations
At the time, banks were not regulated in the US by
the government.
Banks had bought market shares with deposited
money, confident they would continue to increase in
value.
When prices crashed, people rushed to withdraw
their money from banks, but most banks did not have
the money and went bankrupt.
Fortunately, in Canada, banks were better regulated,
and few people lost their savings through bank
failures.
Shrinking Demand for Exports
Canada depended on exporting products to
the world to make money.
About 33% of Canada’s gross national
income came from exports.
Within 3 years of Black Tuesday, trade
dropped by 50%.
Massive unemployment spread through
Canada as a result.
In addition to a general drop in worldwide
trade, demand for Canada’s top exports,
notably wheat, became extremely low.
This was due to:
Soviet Union resumed wheat exports in 1928
European countries increased tariffs
There was a HUGE stockpile of wheat
US and Brazil were actually burning their
surplus to create an ‘artificial demand’
Wheat prices collapsed, from $1.03 per
bushel in 1928, to just $0.29 in 1931.
The prairie provinces were especially hit hard
by the depression.
This pattern of oversupply held for other
Canadian exports, such as newsprint and
minerals.
Bad Times Ahead
For a select few people,
those with fixed incomes, it
was actually good times
since their money had
more buying power.
For the majority of Cana-
dians, however, the
Depression meant wage
reductions, and often
unemployment.
Standards of living
dropped, and there were
very few social assistance
programs to help them.
Watch: The 1929 Wall Street
Stock Market Crash