Science Fair Project Encyclopedia
This investment drove share prices up to artificially high levels, the rising share prices encouraged more people to invest, as they hoped the shares would rise further, thus fueling further rises, and creating an economic bubble. The banks lent heavily to fund this share-buying spree. On October 24, 1929, the bubble finally burst and panic selling set in. Thirteen million shares were sold in the space of one day, as people desperately tried to dispose of their shares before they became worthless.
Over the following few days another thirty million shares were sold, and share prices collapsed, ruining millions of investors.
The crash dramatically worsened an already fragile economic situation, and was a major contributing factor to the Great Depression. There is a good deal of controversy among economists and historians about the nature of that contribution, though. Some hold that political over-reactions to the crash, such as in the passage of the draconian Smoot-Hawley Tariff Act through the US Congress, caused more harm than the crash itself.
After the experience of the Black Thursday, stock markets around the world instituted measures to temporarily suspend trading in the event of rapid declines, so as to prevent such panic sales. As a result, later stock market crashes have never been quite as severe as that of 1929.
The contents of this article is licensed from www.wikipedia.org under the GNU Free Documentation License. Click here to see the transparent copy and copyright details