The Legacy of Black Tuesday

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major investment in steel and machinery, and indicating the level of trust the American public had in the success and growth of US businesses, especially heavy industry. Millions of people were encouraged to invest in stock, driven by the belief that prices would continue to rise. The loss of that confidence led to a sudden reduction in consumption and investment spending, in turn causing the people to believe that they would forego loss by steering clear of the markets, which was far from reality.

However, the blame can be placed on the Federal Reserve Bank for being too passive during the recession, allowing large public banks, such as the New York Bank of the United States, to fold, causing panic among the investors and several runs on other major banks. Emergency lending or the simple purchase of government bonds could have been implemented to increase liquidity and avoid the decline of smaller banks, however, the Fed's credit capability was running low, due to the Federal ...

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