1929: The Great Crash

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In 1929, years of booming prosperity

ended in catastrophe.

It was the biggest stock market

crash since records began.

It is impossible to underestimate the

shock, a sense of stunned disbelief.

First-time investors borrowed huge amounts

of money to speculate on the market.

The market broke very sharply, and a

lot of people were wiped out with it.

It was very painful.

Later, thousands of banks failed.

Millions lost everything.

The poverty was really all around

us. It was really, really pitiful.

The Crash was followed by a Depression

that spread across the world,

lasted for a decade

and was a prelude to war.

This is a story

of a financial disaster

that we hoped

would never happen again.

Wednesday 23rd October 1929,

without warning,

share prices are plummeting

on the New York Stock Exchange.

Investors are stunned.

For the last five years,

the market has only gone up.

In the space of an hour, a staggering

2.5 million shares are sold.

The next day,

the downward spiral continues.

As people came in

to trade stocks on October 24th,

there was a sense that

maybe something had changed.

All of a sudden,

there just weren't buyers.

People were willing to sell, but there

weren't buyers coming forth to buy the stocks.

And prices began to fall $2, $4,

$10 a share. It was horrifying.

That morning, there were drops on the Stock

Exchange that were so sharp and so dire,

stock suddenly dropping

10, 20, 30 points at a time,

that it's said that there were

shrieks and gasps in the gallery

of the New York Stock Exchange.

People are stunned

by what is happening, and terrified.

Thousands of people begin to gather

outside the Stock Market.

10,000 people.

They fill the streets

from Broadway to the East River.

People wanting to know what

was going, they went there.

These huge crowds gathered around

the Stock Exchange,

around the statues

and on the stairs,

waiting to get any kind of news they

could as people came out of the exchange.

They could hear the shouting and

yelling as people were buying and selling

but they but they

didn't know what was going on

until they gathered

and they stayed there, to find out.

Few of the thousands waiting in the crowd appreciated

the scale of the disaster that was about to unfold.

Nor could they imagine that,

over the next five days,

a financial catastrophe would sweep away

the foundations of America's prosperity.

But to understand what brought about

the crash, we need to go back a decade,

to a time when American confidence grew so high

that it seemed the good times would last for ever.

In 1919, the US had emerged

victorious from World War one.

A mood of optimism was in the air.

Britain and its European Allies were

exhausted financially from the War.

But the US economy was thriving and

the world danced to the American tune.

The uncertainties were over.

There seemed little doubt about

what was going to happen.

America was going on the greatest,

gaudiest spree

in history, and there was

going to be plenty to tell about it.

In the 1920s, everyday life

was changing.

Electrification

transformed America.

Towns were hooked up to the grid.

New technologies emerged -

aeroplanes, radios.

Domestic goods that had started life

as luxuries, now became necessities.

The car industry also boomed as people flocked to

buy one of the new Ford or Chrysler automobiles.

An era of boundless prosperity

seemed to have begun.

This is the flowering of consumer culture and

mass consumption on a scale never before seen.

There is also heavy

instalment buying

to encourage people to buy big ticket consumer

items, so that they can buy those items on credit.

This type of consumer credit

was another innovation of the 1920s.

For the first time, the idea of "buy

now, pay later" hit the mainstream.

There's a kind of a play culture that

develops alongside this consumerism which says,

"We believe now in instant gratification.

Take care of the now. Live for the moment. "

It was a whole ideology,

that we were in a new economic era,

and it was the birthright of every

self-respecting American to be rich.

With easy credit

and more disposable income,

Americans were now looking for

new ways to get even richer.

Since World War One, the US government had sold

bonds, known as Liberty Bonds, to pay for the war.

This was a way to

borrow money from the public,

who, in turn, would receive interest

payments on the bond's value.

Celebrities such as Charlie Chaplin

and Douglas Fairbanks

had been recruited to promote them

at huge rallies.

Liberty bonds caused many people to become

investors in securities for the first time.

For the first time in their lives,

they got interest payments

every six months,

And the security was something

they could trade on the markets,

so they could look in the newspaper and

see what the price of my bond is today.

Liberty bonds

created an investing culture.

Most people had never purchased

securities before

and it got ordinary people

accustomed to buying securities.

Now there was another group

of people who thought

they could take advantage

of this new investing culture -

the bankers of Wall Street.

For years Wall Street,

the centre of American finance,

was made up of

a small, elite group of bankers

doing business with each other in a

society closed off to the general public.

But one man saw an opportunity that would

change the face of the financial world.

Charles Mitchell, president of National City

Bank, spotted a lucrative gap in the market.

Mitchell saw that investors had purchased a

lot of government bonds during World War I,

and so, he said, "Now we

have an investing public there,

"all we need to do is market other

products like corporate bonds,

"common stocks, and just tell people

these are respectable investments. "

Mitchell was a natural salesman

with a big ambition.

If people were willing to buy bonds

to raise capital for the government,

surely they could be tempted to buy

stocks and shares,

to raise capital for private companies

listed on the New York Stock Exchange?

And they could make a profit

for themselves in the process.

Gradually, people who never dreamed that

they would invest in stocks were doing so,

and stocks lost a lot of the stigma.

Historically, stocks had been considered

much too risky for ordinary people,

whereas in the 1920s, there was a sense that,

investing in stocks was, in fact, not only safe

but reliable and respectable.

The idea took off.

And to exploit this lucrative new market, Mitchell

opened brokerage offices all across the country

where people who had the money

but not the investment know-how

could speculate in

stocks and shares.

This speculative frenzy embraced all

kinds of people, not just professionals.

Ordinary people began participating,

as well, in unprecedented numbers

all across the country - not just in New

York City but in cities and small towns -

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