In 1929 the US Stock Market suffered the biggest blow it has ever seen. It was the beginning of the great depression, and it wasn't until 2954 that the price of stocks had regained the same value as before. On what has become known as “Black Tuesday”, 13 million shares were traded, wiping out thousands of investors and losing billions of US dollars.
It's estimated that, at the time, around 60% of the population was living below the minimum wage that was predicted to be able to survive, and as the economy suffered such a large crash, the poorer families out of this percentage were not able to buy anything anymore, so therefore stopped purchasing products. This had the knock on effect of job losses in the factories and companies as there was no demand to increase production. Unemployment became a huge issue with an estimated 12,000 people being made unemployed every single day during the depression's peak and peaking at 24.9% of the total population. Wages decreased by 42%, economic growth slumped by 50% and worlds trade by a massive 65%. Over the course of the week, the economy lost $30billion, which today, with the price of inflation. would equate to over $377.5billion.
Other effects were that 1616 banks went bankrupt, 20,000 companies went bankrupt, and 23,000 people committed suicide in one year, which is the highest rate ever recorded. There was no support system for unemployment back then which forced people to extreme measure. Apparently, some people were starting forest fires to become fire fighters, and farmers would kill their animals to bypass the cost of keeping them as nobody was buying the meat, despite it being recorded that people were starving to death.
What we have learnt from all of this is that we need to regulate the economy. The crash was initiated by banks lending freely to speculators who inflicted the stock to heights that were just no sustainable - basically, share prices became much higher than what they were actually worth. Around 40% of all bank loaned money was being used to purchase shares as people saw it as a way of making money quickly, like the Gold Rush.
With a lack of government protection, when the economy crashed, there were no safety nets. Policy makers used the problems faced during The Great Depression period to build up regulations which are still used today, including bank deposit insurance and social security. Despite this, the economy also slumped in 2008 due to a de-regulatory fervour from the 80s and 90s, however without the regulations established from The Great Depression, things would have been considerably worse.
Although the stock markets crashed again in 1987, and suffered the largest economic decline in a single day, because of the lessons learned from The Wall Street Crash of 1929 and the following Great Depression it wasn't so disastrous for the goal economy, and after only two years, market prices were restored. This shows us that regulation is effective, for when the economy collapses.