El crack del 29 y la Gran Depresión

Summary

The 1929 stock market crash, known as 'El Crack del 29,' marked the beginning of the Great Depression, devastating economies worldwide. Fuelled by speculative investments, easy credit, and overconfidence, the bubble eventually burst on October 23, 1929. A chaotic sell-off ensued, with people losing their savings, and banks collapsing. Despite brief interventions from financial elites, the market's collapse deepened with the infamous 'Black Tuesday' on October 29, 1929. The economic fallout led to widespread unemployment, poverty, and social unrest, eventually contributing to the rise of Adolf Hitler in Germany.

Takeaways

• 😀 The Stock Market Crash of 1929 was the most devastating financial collapse in U.S. history, leading to the Great Depression.
• 😀 The crash occurred on Wednesday, October 23, 1929, and was followed by a massive panic on Black Thursday, October 24, 1929.
• 😀 The 1920s in the U.S. were marked by economic prosperity, known as the 'Roaring Twenties', with rising stock values and easy access to credit.
• 😀 Citizens, from bankers to shoe shiners, could borrow money to invest in the stock market, creating an environment of over-leverage.
• 😀 The Federal Reserve played a role in inflating the market by lowering interest rates and facilitating easy credit, contributing to the bubble.
• 😀 The stock market became accessible to everyone, not just experts, leading to widespread speculation and unsustainable demand for stocks.
• 😀 By 1929, stock prices were inflated far beyond their real value, creating a speculative bubble that eventually burst.
• 😀 Warnings about the bubble, including from banker Paul Warburg, went unheeded, leading to the collapse.
• 😀 On Black Thursday, panic selling ensued as millions of stocks were dumped, and rumors of suicides circulated as the crisis deepened.
• 😀 Major banks and financiers, including J.P. Morgan and John Rockefeller, intervened to stabilize the market briefly, but it wasn't enough to prevent the long-term crash.
• 😀 The collapse resulted in widespread bankruptcy, unemployment, and social unrest, and the economic effects spread globally, leading to the rise of Adolf Hitler in Germany.

Q & A

What was the 'crack of 1929' and why is it considered the most devastating market crash in history?

The 'crack of 1929' refers to the stock market crash on October 29, 1929, which led to the Great Depression. It is considered the most devastating market crash in history due to its massive economic impact, where many people lost everything, and it triggered a prolonged economic downturn that affected not only the United States but also the rest of the world.

What factors contributed to the bubble in the stock market leading up to the crash?

Several factors contributed to the stock market bubble, including widespread speculative investments, easy access to credit, and the introduction of buying on margin. People were borrowing money to buy stocks, and the demand for stocks grew uncontrollably, inflating prices beyond their real value.

How did the creation of the Federal Reserve and its policies contribute to the stock market boom?

The Federal Reserve's policies in the 1920s, particularly lowering interest rates, made credit easily accessible. This contributed to an inflationary bubble in the stock market, where people borrowed money to invest in stocks, fueling the rapid growth of the market.

What role did Charles Michel and his bank play in the market expansion?

Charles Michel, president of the National City Bank, played a crucial role in expanding the market by promoting corporate bonds and stocks as low-risk investments. He also helped create a public interested in investing, leading to more widespread participation in the stock market.

What was the significance of the 'Black Thursday' (October 24, 1929)?

Black Thursday, October 24, 1929, was a critical point in the stock market crash, with massive panic selling. In just a few minutes, a million shares were sold, causing stock prices to plummet. This day marked the beginning of the panic that culminated in the crash, with many people fearing the collapse of the financial system.

Why did many investors continue to buy stocks despite warnings of a market collapse?

Many investors continued to buy stocks despite warnings because of their overwhelming confidence in the market’s continual growth. They were caught up in the optimism of the 'Roaring Twenties' and believed that stock prices would continue to rise indefinitely, leading to a dangerous speculative bubble.

What were the consequences of the crash for the banking system in the U.S.?

The crash caused widespread panic and a banking crisis. Many banks had lent money to investors who could not repay their loans, leading to bank failures. Over 3,000 banks closed within the next two years, and millions of people lost their savings as a result.

How did the stock market crash affect unemployment in the United States?

The stock market crash and the subsequent Great Depression led to massive factory closures, which significantly increased unemployment. The economic collapse caused millions of people to lose their jobs, leading to widespread poverty and social unrest.

How did the Great Depression spread to other parts of the world?

The Great Depression spread to other parts of the world through economic interdependence. Countries like Germany, the UK, and France were impacted by the collapse in international trade and the financial instability caused by the U.S. market crash. This global economic downturn led to increased unemployment and social discontent in many countries.

What impact did the Great Depression have on Germany and the rise of Adolf Hitler?

The Great Depression had a profound impact on Germany, exacerbating its economic troubles and creating widespread social unrest. As unemployment rose and the crisis deepened, a young Austrian soldier, Adolf Hitler, began to gain support, presenting himself as the solution to Germany’s economic and political problems. This helped fuel his rise to power.