A Narrative Is Born
The word crash quickly became associated with the one-day stock market drop
on October 28, 1929, along with a slightly smaller drop on October 29, 1929,
and it became inextricably linked to the Great Depression that followed. Crash
calls to mind reckless or drunk drivers or race cars pushing their limits, and the
crash narrative typically implies that a period of exceptional boom, of crazy
optimism and maybe even reckless and immoral behavior, preceded the crash.
The narrative of human folly expressed in a stock market boom followed by a
horrendous stock market crash is still very much with us today.
The atmosphere of speculation in the 1920s was unsurprisingly associated
with a technological advancement: the Trans-Lux Movie Ticker (also called the
ticker projector). First mentioned in the news in 1925, and proliferating after that
in brokerages, clubs, and bars, the ticker projector was invented amidst the
public excitement about the stock market. The projector showed the latest trades
in the stock market on a screen large enough to be seen by a substantial
audience. Watching the information displayed by the projector was like watching
a movie, or, as we would say today, like watching a large flat-screen television.
A crowd could gather at one of the tickers, thus encouraging the contagion of
stock market stories. According to an Associated Press account in 1928, the
movie ticker brought in “wild trading”:
This has whetted the speculative appetite of thousands and created many new
ones, the thrill of seeing one’s stock quoted at advancing prices on a heavy
turn-over being akin to that of the race track devotee who sees the horse on
which he has placed his bet come thundering down the home stretch in
advance of the field.2
The persistence of this narrative helps explain the public fascination in
subsequent decades, and even today, with domestic stock price indexes, which
the news media display constantly. People widely believe that the stock market is
a fundamental indicator of the economy’s vitality.
The word crash was not commonly attached to stock market movements
before 1929, and the new use of the word became a name for a different view of
the economy, that economic growth depends heavily on the performance of the
overall stock market, so that the stock price indexes are taken as oracles. The

phrase boom and crash had been popular in the nineteenth century, but it was
used most often to refer to cannons firing, storm waves beating upon the shore,
or even Richard Wagner’s music. After 1929, boom and crash went viral and
usually described the stock market.

Crash: The Breaking Point between Speculative Excess and
Hopelessness
Economists still puzzle over the stock market crash of October 28, 1929, a date
on which no sudden important news occurred other than the crash itself. Just as
baffling, though less discussed, is the exponential growth of stock values over
most of the decade of the 1920s that preceded it. The year 1929 saw the most
dramatic upswing ever, with more than a fivefold increase between December
1920 and September 1929. By June 1932, the value of the market had fallen
back down to below its December 1920 level.
Earnings per share also increased dramatically over the 1920s, but the puzzle
is why the stock market responded so heavily to these earnings increases. It is
more normal for the stock market to react hesitantly to such upswings in
earnings, which are exceptionally volatile from year to year and could even fall
to zero in a single year. But surely the stock market should not fall to zero
because of one bad year. Nor, normally, should it rise to match earnings in one
spectacular year.
The crash of 1929 is not best thought of as a one- or two-day event, though
the narrative usually suggests that it was. The combined October 28–29, 1929,
crash brought the Standard & Poor’s Composite Index down only 21%, a
fraction of the decline over the next couple of years, and this drop was half
reversed the next day, October 30, 1929. Overall, the closing S&P Composite
Index dropped 86% from its peak close on September 7, 1929, to its trough close
on June 1, 1932, over a period of less than three years. The October 1929 one-
day drops are talked about most often, but much more noteworthy was the stock
market’s irregular but relentless decline, day after day, month after month,
despite the protestations of businessmen and politicians who said the economy
was sound.
This narrative was especially powerful in its suddenness and severity,
focusing public attention on a crash as never before in America. Certainly, the
October 1929 one-day drops set records, and records always make for good
news stories. In addition, there was something about the timing of this story that
caused an immediate and lasting public reaction. In his 1955 intellectual history
of the 1930s, Part of Our Time: Some Ruins and Monuments of the Thirties,
Murray Kempton wrote: