Everyone worries about it and every analyst want to predict it and its behavior.
In ’29 when the banks went bust Our coins still read “In God We Trust”.
What happens when a stockmarket falls precipitously, as in the United States in 1929 and on black monday in many markets in 1987. J.K. Galbraith, in his classic book, The Great Crash 1929, gave five main reasons for the 1929 fall.
1 The poor distribution of money in American society. The top 5% of the population was reckoned to be receiving 33% of all personal income.
2 Bad corporate structure. The 1920s was a decade of stockmarket fraud; crooks bled companies of huge amounts of money.
3 Bad banking structure. There were too many independent units; the failure of one led others to collapse in a domino effect.
4 The United States’ foreign balance. There was a declining trade surplus for the first time in modern history. 5 The poor state of economic intelligence at the time. The government made decisions that were contrary to the best interests of the economy, and too little was known about the true state of the economy.
Putting these and other failings right has done much to prevent similar falls occurring. But, as Black Monday in 1987 shows, anything can happen if investors lose confidence in the markets. The decline in share prices from 2001 onwards was painful – share prices on most major stock exchanges halved in value – but it was not a crash.
In ’29 when the banks went bust Our coins still read “In God We Trust”.
What happens when a stockmarket falls precipitously, as in the United States in 1929 and on black monday in many markets in 1987. J.K. Galbraith, in his classic book, The Great Crash 1929, gave five main reasons for the 1929 fall.
1 The poor distribution of money in American society. The top 5% of the population was reckoned to be receiving 33% of all personal income.
2 Bad corporate structure. The 1920s was a decade of stockmarket fraud; crooks bled companies of huge amounts of money.
3 Bad banking structure. There were too many independent units; the failure of one led others to collapse in a domino effect.
4 The United States’ foreign balance. There was a declining trade surplus for the first time in modern history. 5 The poor state of economic intelligence at the time. The government made decisions that were contrary to the best interests of the economy, and too little was known about the true state of the economy.
Putting these and other failings right has done much to prevent similar falls occurring. But, as Black Monday in 1987 shows, anything can happen if investors lose confidence in the markets. The decline in share prices from 2001 onwards was painful – share prices on most major stock exchanges halved in value – but it was not a crash.
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