Stock Market Crash of 1929

panic

panic, crisis in financial and economic conditions, marked by public loss of confidence in the financial structure. Panics are characterized by a general rush of investors to convert their assets into cash, with runs on banks and a rapid fall of the securities market. Bank failures and bankruptcies naturally follow. Students of economic cycles have paid much attention to the process of panics, but without definitive result. Perhaps the earliest panic of modern capitalism occurred during 1720 in France and England. Known as the "Mississippi Bubble," it was touched off by wild speculation in the stock of John Law's colonizing company (see Mississippi Scheme). The first major panic in the United States came in 1819, after the War of 1812. The panic of 1837 was much more severe; it was brought on primarily by irresponsible financial operations in Western lands. Another crisis in 1857 was caused in part by massive European speculation in American railroads. Thus, when the panic struck it affected both Europe and the United States. In 1869 stock manipulations brought on the panic known as Black Friday. In 1873 there was a financial crisis in Vienna, as well as an American panic marking the bitter contest between agrarians (see Populist party), caught by overextended credit, and the financial interests. That conflict continued and was again reflected in the crises that came in the panics of 1893 and 1907. No great panic occurred again until 1929, when the U.S. stock market crash helped to precipitate a worldwide financial crisis. Confidence was not restored until after 1933, and the effects of the panic were felt throughout the Great Depression of the 1930s. Since 1929, central banks have been quick to provide liquidity to falling markets in order to prevent panics. For example, when the New York Stock Exchange dropped over 508 points (22.6%) on Oct. 19, 1987, the Federal Reserve released a large sum of money overnight to meet demands on brokers. In Sept.–Oct., 2008, the Federal Reserve and U.S. Treasury took more drastic and wide-ranging measures to ensure liquidity and stability in a financial system reeling from the effects of a collapsing housing bubble and the resulting credit crunch and accelerating stock market decline.

See M. A. Bernstein, The Great Depression (1989); C. P. Kindleberger, Manias, Panics, and Crashes (1989); C. R. Morris, Money, Greed, and Risk (1999).

The Columbia Encyclopedia, 6th ed. Copyright© 2013, The Columbia University Press.

Selected full-text books and articles on this topic

The Great Myths of 1929 and the Lessons to Be Learned
Harold Bierman Jr.
Greenwood Press, 1991
The Causes of the 1929 Stock Market Crash: A Speculative Orgy or a New Era?
Harold Bierman Jr.
Greenwood Press, 1998
Perspectives on 20th Century America: Readings and Commentary
Otis L. Graham Jr.
Dodd, Mead, 1973
Librarian’s tip: Chap. 6 "The Causes of the Great Depression" by John Kenneth Galbraith
Wall Street: A History
Charles R. Geisst.
Oxford University Press, 1999
Librarian’s tip: Chap. 6 "The Booming Twenties"
Freedom from Fear: The American People in Depression and War, 1929-1945
David M. Kennedy.
Oxford University Press, 1999
Librarian’s tip: Chap. 1 "The American People on the Eve of the Great Depression" and Chap. 2 "Panic"
Depression Decade: From New Era through New Deal, 1929-1941
Broadus Mitchell.
Rinehart, 1947
Librarian’s tip: Chap. I "Descent and Deficit"
Bylines in Despair: Herbert Hoover, the Great Depression, and the U.S. News Media
Louis W. Liebovich.
Praeger, 1994
Librarian’s tip: Chap. 5 "The Crash"
The Global Impact of the Great Depression, 1929-1939
Dietmar Rothermund.
Routledge, 1996
Librarian’s tip: Chap. 5 "The Origin of the Depression in America"
The Homeless Transient in the Great Depression: New York State, 1929-1941
Joan M. Crouse.
State University of New York Press, 1986
Librarian’s tip: Chap. 2 "New York State on the Eve of the Depression: Attitudes and Policy"
Did Monetary Forces Cause the Great Depression?
Peter Temin.
W. W. Norton, 1976
Librarian’s tip: Chap. III "Precipitation Factors" and Chap. IV "Why the Stock of Money Fell"
The Great Depression and the New Deal
Robert F. Himmelberg.
Greenwood Press, 2001
Librarian’s tip: Chap. 2 "A Decade of Depression, 1929-1941: Theories of Cause and Cure"
Financial Crisis and the Great Depression: A Regime Switching Approach
Coe, Patrick J.
Journal of Money, Credit & Banking, Vol. 34, No. 1, February 2002
Prosperity: Fact or Myth
Stuart Chase.
C. Boni, 1929
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