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One old proverb warns people that “Man proposes, but God disposes”, while another one teaches them that “Misery loves company”, and finally the third one states an unhopeful fact: “Money is a good servant, but a bad master”. These proverbs are eternally wise and topical; however, sometimes, they foretell the ominous events. Thus, the events of “Black Tuesday” became a sinister manifestation of aged wisdom of the mentioned proverbs to full extent. The “Black Tuesday” was the day when a sequence of wrong choices in order to profit as quickly as possible turned out to be baneful for the U.S. economy and led the country into depression for the following four years.
So called “Black Tuesday” occurred on October 29, 1929. In fact, “Black Tuesday” was the third “black” day after “Black Thursday” that occurred on October 24, and then “Black Monday” that occurred on October 28 accordingly. During “Black Tuesday”, the New York Stock Exchange traded the tremendous quantity of 16.4 million shares, establishing the new record of the quantity that was traded on Black Thursday. Pecuniary value of shares traded on “Black Tuesday” accounted for 14 billion dollars, which in terms of 2014 is the equivalent of 185 billion dollars. The aggregate value of the shares fell down by 3 billion dollars. It was the largest drop in the history of the United States. The value of shares of many companies fell drastically in one day, for example, shares of “The United Cigar” fell from 113.5 to 4 dollars.
Billions of dollars were lost, destroying thousands of business owners. The volume of trading was so overwhelmingly enormous that the machinery could not handle it. The panic became uncontrollable. The president of one of the companies jumped from a hotel window. These vents on the stock exchange were initially assessed as “market panic”; however, later historians identified those days (24 – 29 October, 1929) as the beginning of the Great Depression of 1929-1933 (Galbraith).
Man Proposes, but God Disposes
During the twenties of last century, the stock market of the United States experienced headlong expansion. In August of 1929 the stock market reached its peak. Unfortunately, it was artificially made boost that became possible due to wild speculations. Stock market prices exceeded their real values. Investment trusts, buying on margin, and other speculative mechanisms enabled investors to spend more money than they possessed. Respectable national figures encouraged participation. Negligible government regulation policy of the stock exchange as well as the development of jerry-built and precarious financial practices, created unreasonable and imprudent expectations among the population in the late 1920s.The very first alarming signal of coming disaster resounded as early as 1926 when Florida’s land cost dropped by many times in one day. Pleasing climate of Florida made it an attractive place for vacations and retirement and as soon as in early 1920 the railway communications were established, land cost ascended in the geometric progression enriching speculators. Thus, during the land boom (1920 – 1926), Miami’s population grew up from 30,000 people to 75,000. However, two hurricanes that occurred in Miami in 1926 devastated its area and caused 400 deaths, and ipso facto caused the collapse of Florida’s land boom (Leuchtenberg).
By August 1929, the production had already been declining and, accordingly, the level of unemployment had risen. Considering that real value of stocks was grossly exaggerated, the economy of the U.S. resembled excessively inflated balloon, which could blow up any moment. To make things worse, a weak agricculture, low wages of the U.S. population and outrageous use of bank loans made the economic collapse unrepairable at that very moment.
The shares’ prices on the stock market began their steady downfall in September of 1929. Finally, on October 18, after the abrupt and deep drop in prices, the panic began. Thus, on October 24, so called “Black Thursday” there was established the first historic record in 12,894,650 shares that were traded. It was an attempt of leading investment companies and bankers to stabilize the market, so they bought up great blocks of stock. It did work for one day, so the prices on Friday were stable and everything seemed to come to a normal state. Nevertheless, on Monday, the thunder struck with renewed vigor, and on following day “Black Tuesday” the market collapsed (Garraty).
Misery Loves Company
The Florida land boom failure had to be interpreted by business people of those times as a warning, but nobody seemed to care about seeing the real picture. Therefore, only the Wall Street burst-up of 1929 brought the fantasy for good to an end. After October 29, 1929, prices kept on dropping as the United States sank deeper and deeper into the economic crisis, and by 1932 stocks cost accounted for approximately 20 % of their value in August of 1929 (Garraty).
The stock market exchange disaster of 1929 was not the only cause of the Great Depression, but it did expedite the global economic downfall. By 1933, almost 50% of America’s banks declared bankruptcy and unemployment made up 15 million people, or 30 % of the able-bodied population in the United States. The scale of catastrophe was so big that only another terrible event, which was World War II, became a blessing in disguise for the U.S. economy. A huge quantity of armaments that were produced in the United States was able to restore the economy after a decade of decline (Galbraith).