The Great Crash of 1929 wasn't a bubble or a loss of faith—it was caused by a massive pile-up of unsold stuff in warehouses.
SSRN · March 17, 2026 · 6298378
The Takeaway
Traditional history blames Federal Reserve policy or irrational mania for the 1929 crash, but this paper reveals the proximate cause was a 'colossal overhang' of unsold stocks held by brokers. When these underwriters couldn't clear their shelves, it triggered a collapse in credit that started the panic, turning a logistics problem into a generational depression.
From the abstract
This paper identifies the proximate cause of the Great Crash as a colossal overhang of unsold stocks being floated with brokers' loans by underwriters. Reflected in a structural decline in the call rate for a fortnight, the dislocation was targeted by short-sellers, who triggered the first (of three) downdrafts. With the rate path shaped by the initial retreat among underwriters, subsequent onslaughts were driven by the withdrawal of credit by non-bank lenders acting on profit motives. Encompass