In October 1929, the 'Roaring Twenties' came to a dramatic end and the USA economy went into deep depression.

It had been in decline even before 1929. This was because of:

  • overproduction and underconsumption in agriculture;
  • overproduction and underconsumption in consumer industries;
  • decline of traditional industries;
  • the government policy of laissez-faire, which led to insufficient regulation of the stock market and banks;
  • the government policy of protectionism, which reduced America’s trade with other countries;
  • increased debt, partly due to new methods of borrowing at low interest rates;
  • massive speculation on land and the stock market, leading to inflated share prices;
  • a decline in confidence in the economy.

Experienced investors knew America’s economy was slowing down and that shares were overvalued.

In September 1929, they began selling them in large numbers. This caused prices to drop further.

Others now rushed to sell their shares.

On 29 October 1929, known as “Black Thursday", 16 million shares were sold at a fraction of their original price, and consequently the economy collapsed.