Referred to as the Great Crash, the stock market collapse of 1929 is considered to be the most destructive in the history of the United States.

A series of events led to the initial plunge which occurred on Thursday, October 24, 1929. Much like the recession that began in 2007, falling home prices led up to a larger decline in asset prices. Before the '29 crash, real estate prices peaked in 1925. And much like the 2007 recession, the preceding years saw a dramatic expansion of GDP. The roaring twenties produced stock prices that may have been overvalued, causing an asset bubble that would burst with malicious ripple waves. The Dow Jones Industrial Average topped 381 points in early September, marking the highest value it would reach before the Great Crash. Contributing to the stock bubble was an increasing speculative rash of small investors who bought stock, many on margin, despite a perception that asset prices were overvalued.

Market volatility picked up dramatically in the wake of the Smoot-Hawley Tariff Act that was making its way through Congress. Economists would later place much blame on the Tariff that would serve to exacerbate a period of declining GDP with protectionist policies.

After the initial decline on Thursday, stocks plummeted even further on the following Monday and Tuesday, triggering a severe, month-long decline in security prices that would set the stage for the ensuing Great Depression.

Leading bankers chose NYSE vice president Richard Whitney to lead an effort to stem the tide of falling prices by purchasing huge blocks of shares above market prices, hoping to stem the tide of declining confidence. A similar strategy was used to correct the 1907 crash.

Stock prices touched their lowest point of the 20th century on July 8, 1932. It would take more than 20 years for the stock market to return to their pre-crash levels. Fallout from the 1929 crash was long-lasting, including an established fear of protectionism and passage of the Glass-Steagall Act in 1933. The latter of which was repealed in 1998, a factor many contribute to the financial crisis of 2008.

Stock Market Crash of 1929 - Article By Better Trades