The Wall Street Crash of 1929: timeline, causes and what changed

1. 1920sShare prices rise through the decade. Buying on margin spreads, and loans to brokers grow year after year.
2. August 1929The Federal Reserve Bank of New York raises its discount rate from 5% to 6%, with lending for speculation in mind.
3. 3 Sept 1929The Dow Jones Industrial Average closes at 381.17. It will not close higher for twenty-five years.
4. 24 Oct 1929Black Thursday. Heavy selling at the opening on record volume. Leading bankers meet opposite the Exchange and agree to buy; prices recover much of the day’s loss.
5. 28 Oct 1929Black Monday. No support appears and the Dow falls by nearly 13% in the day.
6. 29 Oct 1929Black Tuesday. The Dow falls by nearly 12% more, on about 16 million shares, a volume record that stands until 1968.
7. 13 Nov 1929The Dow reaches its low for the year, close to half its September level. A partial recovery follows into the spring of 1930.
8. 8 July 1932After two more years of falling prices and waves of bank failures, the Dow closes at 41.22, about 89% below the 1929 peak.
9. 1933–34Congress passes the Securities Act and the Banking Act in 1933, which creates federal deposit insurance, and the Securities Exchange Act in 1934, which creates the Securities and Exchange Commission.
10. 23 Nov 1954The Dow closes above its 1929 peak for the first time.

• The Securities Act of 1933 required companies selling securities to the public to register them and disclose their finances.
• The Banking Act of 1933, known as Glass–Steagall, separated commercial banking from investment banking and created the Federal Deposit Insurance Corporation to insure bank deposits.
• The Securities Exchange Act of 1934 created the Securities and Exchange Commission to regulate exchanges and brokers, and gave the Federal Reserve the power to set margin requirements for buying shares.
• A Senate investigation of 1932 to 1934 into banking and stock exchange practices provided much of the evidence on which those laws were built.

• Margin works in both directions. Falling prices produced margin calls, margin calls produced forced selling, and forced selling produced lower prices. The loop is mechanical and does not depend on anyone’s opinion.
• The famous days were not the whole fall. Most of the loss came in the slow decline of 1930 to 1932, after a recovery that looked convincing at the time.
• A rescue by large buyers held for part of one day. Support that depends on a few people’s willingness lasts as long as their willingness does.
• Recovery in the index took twenty-five years. A long history of recovering says nothing about how long any one recovery takes.

These are observations about how markets and rules work, drawn from one episode. They are not advice, and they do not say that anything like it will or will not happen again.

It is easy to judge an episode once its ending is known. This exercise takes four moments from the timeline above, one at a time. At each it shows only what had been made public by then, asks a hypothetical question with three plain choices, and then shows what came next and what each choice would have meant.

The text headed “what had been made public by then” is this site’s own summary of the record, written afterwards. It is not a contemporary document and nothing in it is a quotation. The position described is imagined. No choice is marked right, there is no score, and nothing is stored.

A hypothetical for study, not advice. It does not say what anyone should have done then, or what to do now.

The crash and the Great Depression are linked in memory, but economists do not agree that the first caused the second. Most accounts give more weight to the bank failures of 1930 to 1933, the contraction of money and credit, and the working of the international gold standard, with the crash as the opening shock. The stories of financiers jumping from windows in October 1929 are largely legend. The index figures given are closing levels of the Dow Jones Industrial Average as published by its compiler.

How much did the stock market fall in the 1929 crash?

The Dow Jones Industrial Average fell by nearly 13% on Monday 28 October 1929 and by nearly 12% on Tuesday 29 October. From its peak close of 381.17 on 3 September 1929 to its low of 41.22 on 8 July 1932, it lost about 89%.

Did the 1929 crash cause the Great Depression?

Not by itself, on most economists’ reading. The crash destroyed wealth and confidence, but the depth of the Depression is usually put down to the bank failures of 1930 to 1933, the fall in money and credit, and the gold standard. How much weight the crash deserves is still debated.

How long did the market take to recover after 1929?

The Dow Jones Industrial Average did not close above its September 1929 peak until 23 November 1954, twenty-five years later. That is the index level alone and takes no account of dividends or of changes in prices generally over the period.

• Margin
• Margin Call
• Leverage
• Index
• Recession

The Federal Reserve’s own history pages, the published record of the Dow Jones Industrial Average, the United States Senate’s banking inquiry of 1932 to 1934, and contemporary newspaper accounts.

A number is given on this page only where it is famous and certain. Nothing here is a quotation.