Garrison Keillor tells a story in a classic Lake Wobegon episode of his memories of hot summer days working in the garden. He would be outside all day sweating, miserable, and hot, wishing that they could have air conditioning. He also recalls how his mother used to tell him to make the best of his situation because life was what you made it. He took his mother’s words to heart, and passed the time throwing tomatoes at his sister. During the stock market crash of 1929, however, the public and government definitively did not make the best of their situation.
In reality, the public overreaction, gigantic loss of money, and ailure of the government to react to the stock market crash of 1929 continuously worsened the already falling situation. The public overreaction to Black Thursday created a worse crash than necessary in the ensuing weeks. Black Thursday was a large patch of black ice. When the Stockmobile began to slide, instead of taking their foot off of the accelerator and continuing on the road to success, the drivers overreacted, slamming on the breaks, and spinning their steering wheel in a futile attempt to regain control.
This overreaction simply made the Stockmobile go even more out of control, hitting the other arkets on the highway and creating a serious pileup. According to Gale, in early September the public started to waiver in the opinion that the stock market would continue going up. As a result, the stock market began to weaken. Investors stopped buying as much, and inexperienced investors began to worry (“Stock” Carson). One can see that even before the crash the public thought that the rate the stocks were rising at was unsustainable. As a result, a significant group of them sold their stock instead of buying some.
Their transactions would then slow the market even more, and after a few rounds, even more nvestors would see the weakening stock market as a ship to get off of. Quickly the public turned from buying stock to saving and selling what they had. The market plummeted even more, and the cycle continued. On October 24, the crash they had been waiting for came. The next day the New York Daily News reported that “Finding all telephones to brokerage offices busy, about 10,000 [investors]… came rushing pell mell to Broad and Wall sts… The gallery was closed to visitors while the crowd milled outside.
This led to many rumors of panic, wholesale failures and even suicide inside” (Trader). The public, who was lready scared by the dropping prices, now lost their cool completely. Leaving work, many people went to Wall St. to sell all of their stock before the price dropped any lower. Needless to say, this overreaction simply worsened the situation. The fact that every phone was busy shows the reader just how widespread the damage was. Not only was all of New York panicking, but the whole country. Also, the plain amount of rumors flying around did little to help calm the crowds down.
It may have worsened more than helped the situation, and all that would do is inspire more selling of stock. Overall, the effect of he population was that the stock market prices continued to fall, creating gigantic economic losses. The stock market crash of 1929 was escalated substantially through the gigantic economic losses. The stock market is supposed to be buying and selling shares of a business. Therefore, if a business does well, it’s stock should do well, and if a business does poorly, it’s stock should do poorly.
However, at this point in time people were buying and selling stock according to what stock was being bought. Consequently, once a stock started being sold everyone would sell it. Figure 1 shows one the normous amount of losses of stock on October 24 and the days after. It should be well known to everyone the old saying ‘what goes up must come down,’ and that is exactly what happened here. The reader sees that in the months before Black Thursday, the date of the crash, the price of stock skyrocketed. The unprecedented, euphoric rise in stock was just too good to be true.
So when the price hit the ground, it went down hard. Even though there was a small comeback when the people realized that it had not affected the business world, it was the beginning of a depression. According to the New York Daily News, the total loss was over $3 billion. In addition, some of the most active stocks lost hundreds of thousands of dollars, and even some of the more conservative stocks lost almost 40% of their total value (Trader). Although $3 billion would be a significant amount to lose now, in today’s currency that would be worth well over $42 billion.
AS a result, this drop was not only the worst economic crisis up to that time, but quite possibly the worst ever. Although some stock does move quickly, for any one type to lose hundreds of thousands takes immense skill and concentration. As some stock can manage to change barely 1% in a week or more, for a stock to lose 40% in such a short time hows just how terrified the public was. Also, this fall compounded the issue, providing even more people with a reason to sell their stock before it went even lower. One can clearly see that this loss of stock quickly turned into another way for the economy to drop into the depression.
Even so, with the government’s help the crash could have been stopped. The fact that the government failed to react quickly and strongly enough to the crash of 1929 quickened the economic downturn of the following weeks. The president is not only in office to govern his people, his job is also to help the people when they are in trouble. However, Hoover failed to do so after the crash.
A few days after the crash, President Hoover gave a news conference in which he said, “The ultimate result of it is a complete isolation of the stock market phenomenon… he financial world is functioning entirely normal and rather more easily today than it was 2 weeks ago” (qtd. in “Stock” Riggs). Herbert Hoover was obviously trying to control the severity of the crash by convincing the nation and the world that the market was going to go back to normal soon. He wanted to believe that despite the fact that the government mostly ignored the nation would be back on it’s feet quickly. He even tried to convince the public that the crash was good for the overall economy to stop them from panicking even more.
Although he did what he thought was necessary, it did not stop the country from moving deeper into depression. Later, in 1987, a similar crash happened, but that time the government and banking systems injected massive amounts of liquidy, and so successfully stopped it from becoming a general business depression (James). The reader will most likely not remember learning about the Depression of ’88 in school, and this phenomenon is partially the result of loans given to keep the tock market afloat. These loans stopped the downward trend, and bought the investors time to get back on their feet before any major damages occurred.
Although the government had to be repaid, in the long run it did help stop the depression of ’88 from happening. One can see that if Hoover had gotten the government and banking systems to insert more cash into the stock market they would have been able to slow it down much faster. The Stock Market Crash of 1929 was greatly worsened as a result of the public overreaction, gigantic economic losses, and the failure of the government to react quickly to the situation. The public’s overreaction was caused by the slowing and backtracking of the stock market, and resulted in complete panic.
The significant economic and monetary losses weakened the economy and resulted in an elongated crash in the following weeks. In addition to these issues, the government did not react as well as they did in the 1980’s, which allowed the market to slide even lower. Their reaction worsened the situation. Instead of selling all of their assets, they too should have taken their mother’s words to heart. They might have just been so much happier if they had spent their time throwing rotten tomatoes at each other.
