84 Years Ago ‘Black Tuesday’ Ended Inflation In Stock Market

Black Tuesday slammed Wall Street October 29, 1929, 84-years ago today. Investors traded 16,410,030 shares on the New York Stock Exchange in but one day.

Billions were lost and thousands of investors lost everything in one day. The volume was so heavy, stock tickers ran behind as the machinery was incapable of handling such volume.

Depression set upon the industrialized world.

The 1920’s gave the stock market something to roar about. The so-called “Roaring Twenties” was a time of rapid expansion, hitting its peak just a few months prior in August 1929. It was a time of widespread speculation, and by that time production had declined  and unemployment was rising which left stocks bloated in excess of their total value.

The peak for the stock market was in August 1929, and this period of widespread speculation and production had already declined and unemployment was increasing. Stocks were inflated in excess of their worth.

Back then, in 1929, the stock market was overvalued and inflationary. Today, the US finds itself in much of the same situation, with the S&P logging record highs.

Deflation, credit problems, monetary problems and a collapse in international trade all sealed the fate of the US as it moved into the Great Depression.

Franklin Delano Roosevelt took office, and his New Deal expanded the size and scope of government. Relief and regulatory agencies embarked upon projects like the Civilian Conservation Corps, which were great in scope. Some argue the National Recovery Administration hurt the economy further.

During the time, few hired employees due to price fixing and scarce capital.  Franklin Delano Roosevelt’s “undistributed profits tax” hurt the economy still.

Introduced in 1936, many thought this would be a revenue raiser for the New Deal. This meant companies profits went straight to the government, and businesses now had to distribute their profits in either wages or dividends. This directly impeded a business’s ability to save capital or re-invest profits back into the business, thus crippling small businesses in particular.

As an economic failure bar-none, the tax was reduced in 1938, then repealed.  At that point, the Depression was going into its bleakest hour.

Government intervention in the economy and unbridled spending in the 1930s prolonged the depression.

We see parallels in FDR’s policies today.