AZnomicsThe Great Depression
The crash that took a decade to recover from — and rewrote what governments do
On October 29, 1929 — Black Tuesday — the US stock market collapsed. What followed wasn't just a recession. It was a decade-long economic catastrophe that left 25% of Americans unemployed and changed forever what people expected governments to do during a crisis.
The 1920s were the Roaring Twenties — stocks rose 500% in a decade. Everyone was buying on margin: putting down 10% and borrowing 90%. When prices fell, brokers demanded repayment. Investors were forced to sell. Prices fell further. More margin calls. A death spiral. The Dow fell 89% from peak to trough over three years.
The banking system collapsed. 9,000 banks failed. People lost their savings. The government's response made it worse: they raised taxes and cut spending — trying to balance the budget during a collapse. The Smoot-Hawley Tariff raised import taxes, triggering a global trade war. International trade fell 65%. What was a crash became a catastrophe.
Roosevelt's New Deal changed what government is for. The SEC was created to regulate markets. Deposit insurance was invented — your bank deposits are now federally guaranteed because of 1929. Social Security was created. And John Maynard Keynes provided the theory: in a depression, government must spend even if it runs deficits. That idea has governed crisis response ever since.
Every policy response to every crisis since — the 2008 bailouts, COVID stimulus, deposit insurance — is a direct lesson learned from 1929. The world decided it would never let a financial collapse become a decade-long depression again.