Today in 1929, the New York Stock Exchange witnesses the dramatic drop in value of its stock prices – costing thousands of investors to lose great sums of money. Commonly held as the cause of the Great Depression, Black Tuesday was only a symptom of a dying economy.
While a tragedy for Europe, World War I had been an economic boom for the United States. Producing war materials and food stuffs had helped the US economy grow. Following the end of the war, the nation immediately suffered a loss of market. No longer did it need to produce for Europe, farmers kept growing mass amounts of food, far outpacing demand. Prices fell and farmers relied on credit and debt to continue to buy more land, produce more goods, and fall further into debt. This, nearly a decade before the Stock Market crash, was the first sign of economic collapse.
The rest of the nation, however, continued to revel in the economic prosperity that war had brought them. Wishing to never again partake in the horrors of war or the complications of European politics, Americans lived a carefree life. Or at least appeared to live such a life. Credit grew in unprecedented ways, Americans far outspent what they could afford. At the same time, Americans heavily invested in the Stock Market. Ticker tape machines, spewing out stock rates, seemingly appeared everywhere – revealing the widespread appeal of stocks. The prices shot up, not realistically depicting their wealth – the bubble grew.
At the same time the US government continued to try to collect its debts from Europe. France, Great Britain, and others had borrowed heavily from the US during war and without collecting war reparations from Germany (shouldered with the burden of sole responsibility for the Great War) could not pay back their debts. At the same time, the US lent money to Germany to help it pay off its reparations and, in essence, the US paid Europe’s debts to itself. This system left much to be desired and masked a weak Western economy.
By 1929, Americans, their government, and Europeans had all fallen into debt. Farmers had been living in poverty for some time now, but other Americans had begun to default on their debt and the bubble was about to burst. The Stock Market crashed revealed what many had been denying for years. Despite only being a symptom, the Crash signaled panic to the rest of the nation and the downward spiral moved forward in full speed. It would take a combination of private, public, and New Deal efforts to steady the economy. And, as many historians have argued, not until after the United States entered World War II did we also pull ourselves out of the Great Depression.