When did the Great Depression begin?

The Great Depression began in 1929 with the dramatic collapse of the United States stock market in late October of that year. The decade leading up to 1929 had been a period of speculation, easy credit, and rising stock prices known as the Roaring Twenties. By the summer of 1929, the Dow Jones Industrial Average had reached a peak above 380, more than five times its level at the start of the decade, and millions of ordinary Americans had bought stocks on margin, putting down only ten or twenty percent of the price and borrowing the rest.

The market wobbled in early September 1929 and began a steep slide. On Thursday, October 24, 1929, known as Black Thursday, panic selling drove prices down sharply before a group of major bankers stepped in to buy and steady the market. The reprieve was short. On Monday, October 28, the Dow fell almost 13 percent in a single day. The next day, Tuesday, October 29, 1929, called Black Tuesday, brokers traded a record 16.4 million shares and the Dow lost another 12 percent. By mid-November the market had lost roughly half its value compared with September.

Although the crash itself did not directly impoverish most Americans, who did not own stocks, it triggered a chain reaction across the economy. Investors and banks that had lent money on stock collateral suddenly faced huge losses. Consumer confidence collapsed, spending and investment dried up, and businesses began laying off workers. Bank runs spread as nervous depositors tried to pull out their savings.

Industrial production began falling almost immediately, and unemployment climbed sharply through 1930 and 1931. By 1933, around nine thousand American banks had failed and unemployment reached about 25 percent. Economists today still debate the precise mix of causes, but most agree that the speculative boom of the 1920s, weak banking regulation, the Federal Reserve's tight money policy after the crash, the protectionist Smoot-Hawley Tariff Act of June 1930, and falling agricultural prices all combined to turn a stock market panic into a deep and global depression that shaped the rest of the 1930s.