By Stephen Loke and Abhinandan Lawati
Unemployment and economic strife usually accompany a stock market crash.The Stock Market is also known as the equity market. It is a market where shares of public companies are traded and issued. Although the stock market is the greatest money making machine in history, it has also burned holes in the pockets of millions of investors. Over the years, the world has witnessed its fair share of stock market crashes. In the list below, we will recollect some of the worst crashes in history that has devastated thousands if not millions of people all over the world.
Here are some interesting facts about the stock market.
People in the 1600s were crazy for tulips. Let us paint you a picture on how crazy they were; a single tulip bulb at that time cost more than 10 times the annual income of a skilled craftsman. That’s simply outrageous. The Tulipmania is regarded by several historians as the first recorded economic bubble.
Although not exactly a stock market crash, we list them here because there is not much difference between Tulips and Stocks in this case. Both appreciates in price, gets too hot and then burst. The bubble in the Tulip craze finally burst when sellers swarmed the market with hopes of getting rich, when in fact there were hardly any buyers around. As a result of that, the price of tulips kept dropping until it was practically not worth much at all compared to the original price. Countless people lost a tremendous amount of money in this craze.
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The South Sea bubble occurred in 1711 in United Kingdom. During the woeful crash, the South Sea Company’s value dropped to 0! Stocks were initially traded in the South Sea Company for up to 1,000 pounds. How could the stock be pushed up to such an insane value?
Well, investors were sold the idea that South Americans and Mexicans were going to be insane about British goods. In return for those goods they believe that the natives would be willing to give up their gold and treasures therefore making the company a huge profit. When you take into consideration the value of 1,000 pounds in today’s money adjusted for inflation, a great fortune was indeed lost when the bubble burst.
The crash of 1929 occurred on October 28 and 29. The Great Depression occurred in America as a result of the 1929 crash. The Dow Jones Industrial Average witnessed a dip of 38 points on October 28, famously referred to as Black Monday.
The next day wasn’t any good either; black Tuesday triggered a drop of a further 30 points. The entire crash caused the index to fall a whopping 23 %. The 1929 crash is just a foreshadow of what was to come. America had a very bad period during the next decade. People all over the nation lost income and jobs and many had no means to support their family. It was a period of economic tragedy and suffering for the entire nation.
This ill fated crash occurred on a Monday, prompting everyone to call the day Black Monday. On this day, the Dow Stock index lost 22.6% per cent of its value, dropping 508.32 points along the way. Nearly $500 billion was lost that day.
An overflow of sell orders has been distinguished as the cause of the crash. Till this day, the 1987 crash is a reminder to many that success in the stock market is so ephemeral. Those who have gone through that day will always remember the devastation that Black Monday caused the nation.
The real estate and stock prices were at an all time high in Japan from 1986 to 1991. The prices of assets accelerated at a rapid pace. When the Nikkei stock bubble burst in 1991, there was a loss of nearly 50%, with the stock index depreciating from 39,000 to 20,000. The bubble popped when the Bank of Japan decided to tighten its monetary policy in order to curb the problems of the country’s increasing asset bubbles.
The Dot com bubble bear market occurred from March 2000 to October 2002. During that time, the Nasdaq composite fell from 5046.86 to 1114.11, losing 78% of its original value. This occurred when tech stocks were the craze and thousands of investors rushed to invest in companies that had no sound plans.
During those days you could see kids that were just out of college making tons of money and driving Ferraris. However, companies that have no real earnings will always fold up in the end. Soon enough, huge losses were disclosed by the companies and it led most people to lose their life savings. Till today, the Nasdaq Composite Index has not been able to recover the losses that it sustained during the dot com bubble.
When the crash occurred, nearly $1.2 trillion in market value was wiped off the face of earth. At the height of the boom, the Dow Jones reached a high of 14198 points in 2007 to a low of 6469 points. The Dow Stock index dropped more than 7000 points and lost more than 50% during that period.
When this happened, many of the world’s stock exchange followed suit and people all over the world started losing money. It was truly a global catastrophe with millions of people losing their jobs and thousands of families in America losing their homes.