This investment drove share prices up to artificially high levels, the rising share prices encouraged more people to invest, as they hoped the shares would rise further, thus fueling further rises, and creating an economic bubble. The banks lent heavilly to fund this share buying spree.
On October 24, 1929, the bubble finally burst and panic selling set in. Thirteen million shares were sold in the space of one day, as people desperately tried to dispose of their shares before they became worthless.
Over the following few days another thirty million shares were sold, and share prices collapsed, ruining millions of investors.
The banks who had lent heavily to fund share buying, found themselves saddled with debt, which caused many banks to go bankrupt. Millions of people lost their savings, businesses lost their credit lines and failed, causing massive unemployment.
The crash dramatically worsened an already fragile economic situation, and was a major contributing factor to the Great Depression.