Crash of 1929

The sharp fall in the share prices quoted on the New York stock exchange, that came to be known as the crash of 2009, started shortly after the downturn in American economic activity known as the great depression and is believed to have contributed to its severity. The fall continued until the begining of the recovery in economic activity in 1933, by which time average prices had shrunk to no more than 15 per cent of their 1929 peak.

The once popular view that categorised the crash as the bursting of a speculative "bubble" has since been replaced by a consensus among economists that it was the consequence of mistaken monetary policies.

Explanations

The historical evidence suggests that the stock market crashed because the Federal Reserve severely tightened credit to stock investors, not because stocks were overvalued. Subsequent easing of credit was coincident with a recovery in stock prices.