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What was the stock market crash?


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2013-03-13 21:19:22
2013-03-13 21:19:22

A stock market crash is a sudden dramatic loss of value of shares of stock in corporations. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles such as the dot-com boom.

The most famous crash, the Stock Market Crash of 1929, started on October 24, 1929 (known as Black Thursday), when the Dow Jones Industrial Average dropped 50%. This event preceded the Great Depression. The succeeding years saw the Dow Jones drop a total of over 85%. Richard Armour, in his satirical American history book It All Started With Columbus, remarked that the 1929 crash occurred "near the corner of Dun and Bradstreet".

There was also a crash or "adjustment" on Monday October 19, 1987, known in financial circles as Black Monday, when the Dow Jones lost 22% of its value in one day, bringing to an end a five-year bull run. The FTSE 100 Index lost 10.8% on that Monday and a further 12.2% the following day. The pattern was repeated across the world.

The stock market downturn of 2002 was part of a larger bear market and a Dot-com stock market bubble as well as Enron corruption that took the NASDAQ 75% from its highs and broader indices down 30%.

Stock Market CrashDuring the 1920s, people invested in the Stock Market, hoping to make a profit on their investments. At the time, there was no supervision or government regulation of the Stock Market. By the end of the decade, prices of shares on the market reflected nothing more than the willingness of investors to pay those prices. Everyone expected the market to continue to rise. However, economic problems had already developed that would lead to the crash of the market. People invested in companies that were not economically sound. Businesses that appeared healthy had large inventories and could not sell enough of their products to justify the price of the stock on the market. Stock brokers gave loans, called margin buying, to people to invest in the stock market. When the brokers began to demand those margin payments, the investors did not have the money. There was over speculation by just about all the investors. At the time, even banks were permitted to invest customer's savings in the stock market. The market began to rise and fall in the fall of 1929. On October 24, known as Black Thursday, a record 13 million shares changed hands and the value of the stocks collapsed. On Tuesday, October 29, panic had set in and speculators dumped over 16 million shares on the market. But, there were no buyers for those shares. The "crash" on Tuesday created a paper loss of $30 Billion. AnswerThe actual stock market crash happened on what they call "Black Thursday" in 1929 (although there had been other critical and equally black days before that particular Thursday). At the time the stock market had absolutely no political oversight by any government department like we now have with the Securities and Exchange Commission (SEC), and stock manipulation by the big players was rampant and often ill-concealed. Small (and I mean the "ordinary working folk" started to believe that they too could buy stock, ride the coattails of the big financiers, and cash out before a stock bust. You have to remember that this was at the end of a decade of the most rampant and conspicuous prosperity and consumerism; it was (although nobody new it at the time) the end of The Jazz Age and nobody thought the good times could, should, or ever would, come to an end. The small-time players' problems started because they were allowed to buy stock with just 10 percent down; what is called buying on a margin. But, when a stock inevitably tanks as the big manipulators feel they have driven a stock as high as they can, the little guys have to come up with money or they lose the stock. And the money they put in. Some of the BIG players lost money, of course, but comparatively few of them were wiped out as the small players were. Mostly this was because they were all in on the insider dealing, and the stock the little fish was buying was stock that had been dumped by the big players who were, by now, manipulating another stock to the stratosphere. A few of them did bust of course, and a few of them took there own lives although precious few of them actually rained down from upper-floor windows as is popularly believed.

That's the short answer to WHAT. The WHY is much more complex, and you'd be hard pressed to find an economist who could tell you exactly why. A good, short and easy to read paperback (considering the subject is economics) to get hold of from Ebay or Amazon or anywhere else is from the great Harvard economist John Kenneth Galbraith: "The Great Crash of 1929" published by Avon Books. Even Galbraith cannot point to a specific single reason for the crash, but there was plenty of blame to go around.


Related Questions

Banks did not close after the stock market crash. The stock market crash was induced by the closure/failure of Banks.

The stock market crash of 1929 occurred in the United States Of America.

Presient Hoover was blamed for the stock market crash in 1929.

The Stock Market Crash happened in 1929 on Black Tuesday.

If you are referring to the stock market crash of 1929, that was the beginning of the Great Depression.

The stock market crashed in 1929, not 1924.

The stock market crash lead to several things but the main thing was Great Depression

Why did what cause the stock market crash? Please elaborate and ask your question again.

wall street crash of 1929 great crash stock market crash of 1929 The Great Wall Street Crash of 1929 Black Tuesday

at the end of the stock marketday on thurs. oct,24 the market was at a selling panic attack. the profit flew down and that was the result of the stock market crash

The stock market crash took place world wide [all over america] Wallstreet, NY

The stock market crash started a chain of events that caused the American economy to collapse.

Herbert Hoover was president of the United States during the stock market crash of 1929.

Yes. The stock market crash did not cause the depression. Instead the economic crisis and the depression caused the stock market crash

banks had invested their deposits in the stock market.

The term "stock market crash" means the prices dropped so low and so quickly, they were basically worthless. The crash caused panic among investors. The market didn't physically crash into anything.

There have been many stock market crashes. A stock market crash is a steep decline is the value of the main index of the stock market, definitely more than 10% and usually more than 20% in the space of a few days.

The American stock market has "crashed" numerous times throughout history. The most popular crash occured in 1929.

The cascading effect of the stock market crash left one-third of the nation unemployed by 1932.

Herbert Hoover was president during the 1929 stock market crash. He succeeded Calvin Coolidge in March of that year.

A stock market crash is a sudden dramatic decline of stock prices across a significant cross section of a stock market, which results in a significant loss of wealth. Crashes are driven as much by panic as other underlying features.

The stock market crash in 1929 began The Great Depression; everything went downhill after that crash. Because the stock market crash caused many banks to shut down, many business failed leaving people unemployed. Without jobs, people had no money to spend.

The stock market crash of 1929 took place in the state of New York and it took place in Wall Street.

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