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10 NOVEMBER 2019

What happened in Black Thursday 1929

and how did it affect Great Depression in the US?

Writer: Alexis-Aimilios Mitropoulos

The Great depression was one of the most difficult periods in modern history for the civilized world. It lasted about 10 years, from 1929 and the big stock market crash till the late `30s. Some people say that it was one of the main causes of WWII, because it didn`t only affect USA`s economy and society but also the economies and societies of many industrialized countries such as Germany and England. But what it is important for us to do, the objective observers of history, is to seek and find what led to great depression and furthermore to give answers to critical questions that come up: Did Black Thursday (29th of October 1929) affected this very dramatic, economically speaking, period and what can these difficult circumstances teach to us about economy, politics and life?


Black Thursday was one of the days that many American citizens would like to forget. That day the big stockholders of started to redeem their shares, because they saw what was coming next. Of course they belong to the 1% who controls the wealth of USA`s economy. For the other stockholders who belong to the middle class things were different, because they didn`t have the same briefing about what was going to happen. Instead they saw, unable to do something, the loss of their money, property and job.


Knowing all that I strongly believe that the big stock market crash of the 29th of October 1929 didn’t affect Great Depression, but it was just precursor of the global recession that followed. This is very obvious from the fact unemployed in the US were 1.5 million in 1929, a number that increased to 12 million in 1932. Another great fact is that in November 1929 the prices decreased by 1/3 and stabilized till April of 1930 when there was a temporary recovery, the “ dead cat bounce” as it was called. Later in mid 1932 the average price of industrial shares worth the 15% in comparison with October 1929. In conclusion, Ι think that everyone who knows these true facts acknowledges that Black Thursday was not the cause of Great Depression, but just the official start of it.


So which was the main reason that led to Great Depression? In fact many economists have expressed their opinion about this subject. The great British economist John Maynard Keynes argued in his well-known book The general theory of employment, interest and money that a small aggregate expenditure (A.E.) leads to a massive reduction in incomes and high unemployment rates. On the other hand monetarists such as Milton Friedman and Anna J. Schwartz suggested that the great depression was a consequence of the banking crisis which was caused by the acts of the government to control the monetary policy of the bank in order to stabilize the prices, which led to very limited liquidity of the banks.


From the other side, Marxists interpreted Great Depression as an inevitable circumstance of capitalist economy, because the capitalists and especially these who control economies of a whole country tend to create these crises in order to redistribute the wealth of course between them. But we should consider that in the period before the Great Depression there was oversupply of material goods, which according economic laws leads to high rates of unemployment, because labor was replaced by machinery and so the workers and middle class people didn’t have consuming power and there was no liquidity in US economy, resulting to economic and social misery.


In conclusion, nowadays a new economic crash is on and the opinions which were previously referred are more well-timed than ever before. Many suggest that the solution that Keynes gave to USA`s economic problem in the `30s, state intervention in order to reduce unemployment, the famous “New Deal”, which was very successful needs to be applied again. Others think that the state should participate in economy only by reducing the taxes for businesses. I think that especially in USA`s case, considering that Wall Street controls not only the economy but politics too, leading to a more liberal way of economic thought, people should vindicate an economic system, which will give many opportunities to more people to prosper in order to never face again “Black Thursdays “ and “ Great Depressions”.


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