Sox 2002 and the Great Depression 1929
The Great Depression, which began in 1929 and lasted more than a decade, was one of the deepest economic slumps to affect the United States, Europe, and other industrialized countries. Although the actual causes of the Great Depression are still intensely debated, some of the factors believed to contribute to the Great Depression in the United States were the mass stock speculation that occurred during the 1920s; a general imbalance of purchasing power and wealth in that a large percentage of the population was poor while a small percentage was very wealthy; the laissez-faire economic philosophy adhered to by Presidents Warren Harding (1920–1923), Calvin Coolidge (1923–1928), and Herbert Hoover (1929–1933); and the catastrophic crash of stock prices on the New York Stock Exchange (NYSE) in 1929. On October 29, 1929, known as “Black Tuesday,” the U.S. stock market crashed, and the value of stock steeply plummeted.
Black Tuesday was one of the worst trading days in the history of the stock market. Stock prices collapsed and most of the financial gains of the previous year were wiped out within the first few hours of the market’s opening. Since most Americans viewed the stock market as the chief indicator of the health of the economy, the 1929 crash destroyed public confidence in both the stock market and in the U.S. economy.
Stock value continued to fall for approximately three years, until late 1932. By that time, stocks had lost 80 percent of their value from 1929. Individual investors suffered devastating losses; overnight, large fortunes simply melted away with the decline in stock value. Many banks and other financial institutions, particularly those holding a large portion of stocks in their portfolios, also suffered severe losses in assets and by 1933, 11,000 of the 25,000 banks in the United States had failed. By 1932, the U.S. manufacturing output had declined to only 54 percent of its 1929 level, and unemployment had increased to between 12 and 15 million workers, approximately 25–30 percent of the labor force.
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