3 Market Crashes in the History of Economy

The market crash of 1929:

Imagine selling your car in an era where no one actually has a car.

It was one of the causes of the Great Depression of 1929 followed by several other causes such as the post-world war situation, agriculture overproduction due to which the price fell down badly. There is more than one possible reason for the great market crash of 1929.

What did actually happen after the market crash of 1929?

The damn impacts of the market crash of 1929:

Market crash impact on livelihoods

Around the 1920s, many nations funded their investments through loans from the US. While it was often remarkably comfortable to raise loans in the US when everything else was going smooth, the US abroad lenders panicked at the first sign of trouble. During the first mid-period of 1928, US abroad credits summed to over 1 billion USD. Out of curiosity, a year later it was one-quarter of that amount. Nations depending on the US for investments now faces a huge crisis.

The termination of US investments hit the entire world, though in distinct ways.

For example:

1. In Europe, it led to the collapse of some major banks and the collapse of currencies such as the British pound sterling.

2. In Latin America and subsequently, it increased the fall in rural and raw material prices.

Back to the topic:

The US struggle to protect its economy in the crash by increasing import duties also dealt added a sharp shock to world trade.

The US, one of the strongest and the most modern countries at that time and even right now, was severely affected by the market crash.

With the decline in prices and the prospect of a crash, US banks had also gashed residential lending and summoned back loans.

Fields could not sell their harvests, homes were ruined, and companies collapsed. Challenged with diminishing incomes, more than half of the households in the US could not pay back what they had borrowed and were compelled to give up their cars, homes and other customers products.

The consumerist prosperity of the 1920s is now destroyed in a whiff of dust. People started travelling over thousands of miles in the search of employment.

Conclusively, the US banking system itself crumpled due to the troubles it can't handle.

Helpless to recover loans, investments, collect loans and repay depositors, thousands of banks went broke and were made to close. The numbers are phenomenal: by 1933 over 4,000 banks had closed and between 1929 and 1932 about eleven hundred thousand (110,00) companies collapsed.

By 1935, a proper economic recovery was undertaken in most industrial countries. But the market crash, as well as the depression of 1929, worsen the effect on society, politics and international relations, and on peoples’ minds, proved more enduring.

Market crash impact on agronomics (agricultural economy)

The prices slumped and agricultural incomes declined, farmers tried to expand production and bring a larger volume of produce to the market to maintain their overall income. This worsened with the oversupply in the market, pushing down prices even more.

The damn reason behind the market crash of 1929:

The reasons are pretty simple to understand behind the catastrophic disaster caused by the market crash of 1929.

Excess production in industries that surpassed the demand.
Oversupply, surpassing the consumption:

Due to less wage.
Due to less employment rate.
Due to limited accommodation requirements.

Post world war situation of European nations.
Agricultural overproduction.

The market crash of 1987:

The situation here isn't smooth.

The damn impacts of the market crash of 1987:

On Black Monday, October 19, 1987, the Dow dropped, dropping a recording 508 points. By 21st-century figures, that number is certainly plain. From 1998 to 2018, at least twenty days have seen a larger point decline.

Despite this, in October 1987, 508 points symbolised the greatest percentage drop in the history of the tally. On that day alone, the most widely-watched economic symbol in the world fell by a tremendous 22.6%. In the US, the market fell down by more than 20% in a single day.

While the loss for the week was even vaster: “The worst one-week decline in Wall Street history.”- according to a source.

Fear radiated throughout the world, among other closely heeded stock markets, the worst affected were the UK, Hong Kong, Australia, Spain, and New Zealand.

For several months afterwards, the government officials and financial executives everywhere struggled to make judgments of what went wrong, panic was widespread at the time.

In fact, it took about two years for the Dow to recover from it.

The damn reason behind the market crash of 1987:

Many of the new financial devices at the time were either completely unregulated or supported by adjusters who were bound to the industries they superintended. In 1987, the main accused was computer-facilitated trading and academic theories that motivated giant herds of investors to seek the same tactics at the very time with large quantities of capital.

The market crash of 1987 or the Black Monday was also caused by the administrative system that was quite badly implemented. It was extremely scattered or fragmented and the sole purpose of it was to preserve the ground level, rather than protecting the whole market machinery.

A shocking fact is the administrative community didn’t act in a swift, even during the most dramatic climaxes.

The market crash of 2008:

The man just can't take the shock.

The damn impacts of the market crash of 2008:

The simple reasons that triggered the cause were:

Unusual monetary management.
Unwise regulatory system.
Misguided housing policies (known to be the dominant reason).

The consequence led to the robust financial institutions into hell or incurable stage.

The damn reason behind the market crash of 2008:

It all began with the concerned officials and departments that were related to Housing and Urban development management. They were urging the lenders to increase mortgages to borrowers. The motive was to provide affordable homes to citizens.

This new set of borrowers in the plot could have never fitted for loans in a traditional process, followed by Lending standards.

Lending standards were demoted to serve the new set of borrowers. This ended in an increase in loan volume. The loans were then sold to the big Wall Street investment banks, which in twist packaged them into securities and contracted them to investors.

The rating agencies gave some of the bonds rated to the investment bankers. The credit failure swap concept came into influence when other institutions tried to provide monetary institutions with cover, in case of borrowers default.

In the first few years, landlords and the mortgage owners had to return back an introductory rate of credit which is usually quite less than the original. This ended in a tremendous inflow of cash.

The loan arrangement mortgage business, which was resting in the capital market swiftly became a profit and employment generator.

However, the house owners can't repay the loan in large numbers, when after few years, the introductory rate of credit cease to exist and the monthly instalment rate skyrocketed.

Wall Street firms knew that these bonds are overrated. Insurance companies like AIG were assumed to ensure mortgage-backed securities never held capital for what was approaching. The US economy went into a lengthy recession and it is a case of a disaster in financial history.

What caused the market crash in 1929,1987 and 2008