Trading Education: Stock Market Crash of 1929 and the Great Depression | OptionsANIMAL
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Trading Education: Stock Market Crash of 1929 and the Great Depression

Over the course of history, many events have triggered drastic changes in our everyday lives. Events such as the discovery of electricity, the attack on Pearl Harbor and the American Revolution have all shaped the United States and helped to make it what it is today. Another event and era in the history of the United States that has had a profound effect is the Stock Market Crash of 1929 and the subsequent Great Depression that gripped not only the United States, but the world.

The 1929 Stock Market Crash brought an end to the euphoria of Post World War I United States. The effect of the crash brought an end to a carefree life from the roaring twenties and caused families to lose their life savings, businesses closed and millions of people were suddenly without job or the prospects of finding a job. This massive economic depression would grip the world for many years and would create hardships for the majority of people.

Economy Before the Crash

The end of World War I was a joyous time around the world. The allied forces, led by the United States was victorious in defeating Germany creating an upbeat atmosphere. Because of the upbeat atmosphere, the economy was robust and people were enjoying themselves. The 1920's has been known as the roaring twenties, with lavish parties, extravagant outfits and bold new music and dances. The twenties were a decade where people had money to spend, and weren't afraid to spend it, because they believed they would only continue to make money. The stock market was also enjoying a strong upward trend, with no end in sight.

Events of the Crash

During the 1920's, the stock market and its investors enjoyed a streak of gains, with the overall value of the stock market increase by four times the value. However, the bull market that was enjoyed came to a crashing halt. On Thursday, October 24th, as day that has become known as Black Thursday, the stock market hit a severe bump, with nearly 13 million shares being traded, and the stock market value taking a sharp nose dive. On this one day, millions of Americans lost fortunes and panic began to set in to the nation and the world. This panic caused people to sell to salvage some money. Unfortunately, this was the beginning of one of lowest points in the economy of the world.

Great Depression

When the Stock Market crashed in 1929, this caused the values of the stocks of many companies to plummet. Without the value of the stocks in place, the companies lost their value and could no longer afford to stay in business. Thousands of businesses were forced to close or reduce their operations, which in turn forced millions of people to lose their jobs. With the businesses closed, people out of work and other factors, the United States were driven into a Great Depression. This economic depression would last during the 1930's and slowly started to recover by the 1940's.

End of the Depression

The Great Depression crippled the nation during the 1930's, with many people in poverty. The government during the thirties attempted to help the people with various plans to get people back to work. These plans such as the Work Progress Administration and President Roosevelt's New Deal helped to get people back to work. In addition, the government started to work to protect people's money in banks with the Glass-Steagel Act and other laws aimed to bolster the economy. By the time the United States entered World War II, the country was nearing recovery and with the wartime activities of building planes, ships and preparing for war, the activity gave the needed shot in the arm to pull the country out of depression.

Crash Prevention Methods

While the country has suffered through other crashes such as the crash of 1987, the government and the stock market has implemented measures to prevent any major occurrence that would cripple the economy. Now measures are in place that would shut the stock market down when dramatic losses occur. Also, the government has implemented measures to limit the possibilities of losses due to fraud and negligence. The Stock Market Crash of 1929 and subsequent Great Depression has tought the nation valuable lessons, which will be used to make sure that we never have to suffer through this again.

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