By now, you’ve heard about the stock crash of 1929 and the stock boom of the early 2000s.
But just how did the markets react to that event?
What was the reaction to the stock collapse and then the stock bubble?
And why was it so hard for the financial world to grasp the significance of what happened in 1929?
As we look back, some questions that still plague us are: Why did the market crash?
Why was it such a big deal?
What was the role of the Federal Reserve in all of this?
What were the consequences for the economy, especially during the Great Depression?
And, finally, what is the legacy of this crash and what does it mean for the world?
The 1929 stock market collapse was one of the most dramatic events of the 20th century.
It took place as the U.S. economy was entering a period of recession, and the Dow Jones Industrial Average plunged from an all-time high of 17,400 in 1929 to a mere 8,000 in 1932.
In the aftermath of the stock meltdown, it took the Federal Government to get out of the way.
President Herbert Hoover signed a bill that allowed the Fed to buy government bonds to keep the economy afloat.
The Fed also began buying government bonds in the form of Treasury securities, which it then used to prop up the markets.
However, the market turmoil in 1929 prompted the Federal government to make a drastic move that was to make the world economy even more unstable.
“The Federal Reserve Act of 1933” set the stage for the stock-market collapse of 1929, which ultimately led to the Great Recession that is still plaguing the U.
“The 1929 crash was one big shock for the entire economy,” said David L. Sacks, professor of economics at the University of California, Irvine.
“The Fed had an emergency mandate, and when they were ready to act, they went out and bought Treasury bonds at bargain prices.
There was a panic in the markets, and it was a big shock to the market.”
So, why did the stock markets collapse?
“Because the economy was going into an unprecedented recession,” said Alan Krueger, chairman of the University at Buffalo.
“There was the threat of a Great Depression and that would have been bad for the people of the United States.
It was a shock to many Americans.
So the stock panic was one step on the road to a Great Recession.
That recession was to take place when the Federal reserve was selling its bonds, and that is when the markets crashed.”
Why the panic?
“The market crash was the culmination of years of Fed policies to prop it up,” said Kruegers.
“They had taken advantage of a huge liquidity gap in the economy.
As they pumped the economy into the stratosphere, the Fed was able to buy bonds at record-low rates, and then to use those low interest rates to buy the assets that the economy needed.
Now, the economy is not going to recover until the Fed acts again.”
What the stock stock crash and market collapse meant for the American economyWhat did the 1929 stock crash mean for America?
It meant that people were getting a raw deal in the face of a collapsing economy.
The Depression of 1929 brought about the Great Depressions of 1929-1933, which had a major effect on the American financial system.
What the 1929 market crash did was put an end to a long period of relative prosperity in the United Americans.
“The 1929 market collapse changed the course of history,” said John T. Lafferty, director of the Center for Economic Policy Research.
“It changed the balance of power in the U, and people had to start paying more attention to what the Federal budget and the Federal deficit were doing.
And that is what led to this recession, which is what we are still dealing with today.”
“We have lost a lot of good people because of the 1929 crash,” said Richard V. Miller, an economist at the Brookings Institution.
“[The 1929] stock crash was a catalyst for a big change in the financial system, which was a major problem.”
What about the Fed?
For many Americans, the 1929 financial crisis was a time of panic.
This fear of a financial crisis had to be put aside, and they needed to have a sense of confidence in the American economic system.
“You had to have some confidence in that American economic future,” said Laffer, who added that the 1929 crisis was the catalyst for many of the reforms that came about in the 1970s and 1980s.
“When the market collapsed, people were not just losing confidence in America, they were losing confidence that we could ever again build a sustainable economic recovery,” he said.
For years, the Federal debt ceiling was the most important tool that Congress used to keep government spending low.
Congress used the ceiling to