The Crash of 1929 & The Great Depression (PBS) 5of6

Summary

The 1929 stock market crash illustrates the stark contrast between the optimistic declarations of financial leaders and the grim reality unfolding in the economy. Just days before the crash, figures like Thomas Lamont assured investors of a brilliant future, but panic ensued as fear and greed gripped Wall Street. On Black Thursday, the market plunged dramatically, leading to chaos and frantic selling. Despite attempts by bankers to stabilize the situation, the true collapse occurred on Black Tuesday, marking a devastating turning point that foreshadowed the Great Depression, revealing the volatility of market emotions and the fragility of economic confidence.

Takeaways

• 😀 Despite market turmoil, financial leaders were overly optimistic just before the 1929 crash, as exemplified by Thomas Lamont's letter to President Hoover proclaiming a 'brilliant future.'
• 😀 Charles Mitchell reassured investors that the economy was thriving, reflecting widespread confidence among business leaders at the time.
• 😀 The emotional drivers of market behavior—fear and greed—cause rapid shifts in investor sentiment, leading to panic selling during downturns.
• 😀 The events leading up to the stock market crash involved a rapid deterioration in market confidence, with many people beginning to panic in response to falling prices.
• 😀 On October 21, 1929, President Hoover and other leaders celebrated technological advancements in Dearborn, Michigan, while the economy was on the verge of collapse.
• 😀 Black Thursday (October 24, 1929) marked a severe market decline, characterized by chaos at the New York Stock Exchange and a significant drop in stock prices.
• 😀 A group of bankers, including Thomas Lamont and Charles Mitchell, attempted to stabilize the market by pledging substantial financial resources.
• 😀 Richard Whitney, vice president of the New York Stock Exchange, played a crucial role by purchasing large amounts of U.S. Steel shares to instill confidence.
• 😀 Although the bankers' intervention temporarily halted the panic on Black Thursday, it failed to sustain market stability over the weekend, leading to further declines.
• 😀 The real crash occurred on October 29, 1929, with massive sell-offs and unprecedented losses, demonstrating the severity of the financial crisis.

Q & A

What were financial leaders' sentiments just before the 1929 crash?

Financial leaders, including Thomas Lamont and Charles Mitchell, expressed optimism about the economy, claiming it was thriving and securities were highly desirable.

How did emotions like fear and greed influence stock market behavior?

Fear and greed are pivotal emotions in the stock market, causing rapid shifts in investor behavior. Investors might rush to buy when feeling greedy, but a sudden market downturn can trigger panic selling.

What was the significance of the celebration in Dearborn, Michigan, on October 21, 1929?

The celebration marked the 50th anniversary of Edison's invention of the light bulb, attended by President Hoover and prominent industrialists like Henry Ford, contrasting the celebratory atmosphere with the looming economic crisis.

What event is referred to as Black Thursday, and when did it occur?

Black Thursday refers to October 24, 1929, when the stock market experienced a dramatic drop, leading to widespread panic among investors.

How did the House of Morgan respond to the market crash on October 24, 1929?

Thomas W. Lamont gathered several bankers to discuss ways to stabilize the market, announcing a substantial sum to ease credit and support the market, which temporarily calmed the panic.

Who was Richard Whitney, and what role did he play during the panic?

Richard Whitney was the vice president of the New York Stock Exchange, chosen by the bankers to represent them. He attempted to restore confidence by ordering significant purchases of key stocks at higher prices.

What was the outcome of the bankers' intervention on Black Thursday?

The bankers' intervention helped stabilize the market temporarily, leading to a brief recovery and giving many the impression that the panic had subsided.

What was the reality of the market following the brief stabilization?

Despite the temporary stabilization, the market continued to decline, culminating in a more severe crash on October 29, 1929, when stock prices plummeted further, and panic ensued.

What did the chaotic scene on the floor of the stock exchange resemble?

The scene was described as chaotic, with traders running around in confusion, holding orders on red pads for sales while trying to navigate the panic that had overtaken the floor.

What happened to the stocks of companies like AT&T and RCA during the crash?

During the crash, stocks like AT&T dropped significantly by 50%, and RCA saw its value plummet from $110 to $26, with many shares unable to find buyers.