What Have We Learned from the Stock Market Crash of 1929?

It may have happened a lifetime ago but the lessons are still there. The stock market crash of 1929 was a devastatingly low point for our country, but we eventually recovered. We’ve had scares since then but nothing quite as earth shattering. Eight decades have come and gone since then. So what have we learned? The Huffington Post says our financial system needs strong regulation in order to continue to thrive.

The History

OnOctober 24th, 1929, 13 million shares were traded, which led to attempts to stabilize the market. All that frenzy of trading after many weeks of plummeting stock prices meant that investors panicked – hard. Just a few days later on October 29th, 16 million shares took place as everyone tried to offload their stocks. Billions of dollars were gone, marking the start of the Great Depression. An unemployment rate of nearly 25 percent swept the country, leading many to lose jobs and indeed their lives as they realized the gravity of the situation.

Everyone tried to blame everyone else for the economic collapse but really only one reason was clear in the end: lack of financial regulation in the years preceding the crash. Because banks weren’t regulated, they lent money to anyone who would inquire. Speculators chattered on and on about how great the stock market was doing but nothing concrete could back up that chatter. And because no governmental protections were in place, investors lost everything and so did the millions of people who lost their jobs.

Have We Learned?

Some say no. After Black Tuesday and the Great Depression, policy makers renewed their efforts to finally come up with real-world regulations that actually worked. Many are still around today. From bank deposit insurance to laws against speculation, we do have protections in place for most events.

However, we as a nation still go through tough economic times predicated by nosed dives in the stock market. Take the crash of 2008, for example, when de-regulation efforts from the 1990s came back to bite us. Fortunately, older regulations still in place from 1929 assuaged the effects.

Many investors and policy makers on Wall Street still don’t think heavy regulation is the way to go. It remains to be seen with the new administration whether efforts to further de-regulate our system will take place. Only time will tell.

Until then, be wise about your investments and hire an FINRA lawyer if you strongly suspect you have been steered astray by your broker. Here at Thomas Law Group, we have recovered more than $40 million for our clients, with a specialty in defending investors from fraud.

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