Did The 1930 Wall Street Crash Really Cause The Great Depression?
There are few events in history that are as closely tied together as the 1929 and 1930 Wall Street crash and the onset of the Great Depression. Following a decade of wealth and prosperity, the events of October 1929 and the subsequent market crashes that continues through the 1930s are often seen as the cause of the financial crisis that plagued industrialized nations for more than a decade.
While it is understandable that these market events are seen as the cause of the financial crisis, that assumption is not entirely accurate. The exact relationship between the economic and financial crises has been the subject of intense debate.
By understanding how the economy and the stock market exacerbated each others problems, and how long lasting the effects were on the market and society as a whole, you can gain better insight into current market conditions, and ride out market volatility.
The 1930 Wall Street Crash And The Beginning Of The Great Depression
Although most people believe that the crash was a single, drastic one day decline in the market, the reality was that the market began its decline in October 1929 and appeared to reach a bottom by mid-November of that year.
The Dow Jones Industrial Average managed to recoup all but a quarter of its losses between December 1929 and March 1930. The rally was not to last, however, as the sluggish economy caused another decline in the stock market in June of 1930. The 1930 Wall Street crash would propel the market downward, and the trend would continue until the market bottomed out in 1932.
As the stock market and the economy fed on the problems of the other, the fall of 1930 saw the unavoidable signs of depression take hold of the US, almost a full year after the initial crash. The 1929 and 1930 Wall Street crash served to weaken investor confidence, as well as caused a drop in trading volume. The stock market did not reach its 1929 price levels again until 1954.
Regulations Resulting From The 1930 Wall Street Crash
One of the lasting legacies from the 1930 Wall Street crash is the idea that government should intervene in times of financial crisis. Prior to the Hoover presidency, no American president had so much as attempted to revive an ailing economy.
As President Hoover’s policies failed to reverse the course of the Great Depression, the Republican party saw a fall from power that continued until 1952 when they regained the White House. With the depression worsening, a new American President, Franklin D Roosevelt, ushered in a new era of big government.
Roosevelt’s far-reaching economic policies included the most crucial banking reform in United State’s history, the first government regulation of Wall Street financial institutions, and the creation of the US’s first social welfare programs.
While the 1930 Wall Street crash did not directly cause these reforms, it did set into motion the events that would serve to forever change the mood and the character of the country and its institutions. The stock market served as an indicant of what was ahead, and did not return to the forefront in the public’s eye until the post World War II boom was well under way.