Stock market crash

The 1930s (pronounced "nineteen-thirties" and commonly abbreviated as "the '30s" or "the Thirties") was a decade that began on January 1, 1930, and ended on December 31, 1939. In the United States, the Dust Bowl led to the nickname the "Dirty Thirties".

The decade was defined by a global economic and political crisis that culminated in the Second World War. It saw the collapse of the international financial system, beginning with the Wall Street crash of 1929, the largest stock market crash in American history. The subsequent economic downfall, called the Great Depression, had traumatic social effects worldwide, leading to widespread poverty and unemployment, especially in the economic superpower of the United States and in Germany, which was already struggling with the payment of reparations for the First World War. The Dust Bowl in the United States (which led to the nickname the "Dirty Thirties") exacerbated the scarcity of wealth. U.S. President Franklin D. Roosevelt, who took office in 1933, introduced a program of broad-scale social reforms and stimulus plans called the New Deal in response to the crisis. The Soviet Union's second five-year plan gave heavy industry top priority, putting the Soviet Union not far behind Germany as one of the major steel-producing countries of the world, while also improving communications. First-wave feminism made advances, with women gaining the right to vote in South Africa (1930, whites only), Brazil (1933), and Cuba (1933). Following the rise of Adolf Hitler and the emergence of the NSDAP as the country's sole legal party in 1933, Germany imposed a series of laws which discriminated against Jews and other ethnic minorities.

A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. A broader reduction of economic activity affecting the whole economy is known as an economic crisis. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in significant changes in the real economy (for example, the crisis resulting from the famous tulip mania bubble in the 17th century).

Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus and financial crises continue to occur from time to time. It is apparent however that a consistent feature of both economic (and other applied finance disciplines) is the obvious inability to predict and avert financial crises. This realization raises the question as to what is known and also capable of being known (i.e. the epistemology) within economics and applied finance. It has been argued that the assumptions of unique, well-defined causal chains being present in economic thinking, models and data, could, in part, explain why financial crises are often inherent and unavoidable.

The 2008 financial crisis, also known as the global financial crisis (GFC) or the Panic of 2008, was a major worldwide financial crisis centered in the United States. The causes included excessive speculation on property values by both homeowners and financial institutions, leading to the 2000s United States housing bubble. This was exacerbated by predatory lending for subprime mortgages and by deficiencies in regulation. Cash out refinancings had fueled an increase in consumption that could no longer be sustained when home prices declined. The first phase of the crisis was the subprime mortgage crisis, which began in early 2007, as mortgage-backed securities (MBS) tied to U.S. real estate, and a vast web of derivatives linked to those MBS, collapsed in value. A liquidity crisis spread to global institutions by mid-2007 and climaxed with the bankruptcy of Lehman Brothers in September 2008, which triggered a stock market crash and bank runs in several countries. The crisis exacerbated the Great Recession, a global recession that began in mid-2007, as well as the United States bear market of 2007–2009. It was also a contributor to the 2008–2011 Icelandic financial crisis and the euro area crisis.

During the 1990s, the U.S. Congress had passed legislation that intended to expand affordable housing through looser financing rules, and in 1999, parts of the 1933 Banking Act (Glass–Steagall Act) were repealed, enabling institutions to mix low-risk operations, such as commercial banking and insurance, with higher-risk operations such as investment banking and proprietary trading. As the Federal Reserve ("Fed") lowered the federal funds rate from 2000 to 2003, institutions increasingly targeted low-income homebuyers, largely belonging to racial minorities, with high-risk loans; this development went unattended by regulators. As interest rates rose from 2004 to 2006, the cost of mortgages rose and the demand for housing fell; in early 2007, as more U.S. subprime mortgage holders began defaulting on their repayments, lenders went bankrupt, culminating in the bankruptcy of New Century Financial in April. As demand and prices continued to fall, the financial contagion spread to global credit markets by August 2007, and central banks began injecting liquidity. In March 2008, Bear Stearns, the fifth-largest U.S. investment bank, was sold to JPMorgan Chase in a "fire sale" backed by Fed financing.

The Wall Street crash of 1929, also known as the Great Crash, was a major stock market crash in the United States which began in October 1929 with a sharp decline in prices on the New York Stock Exchange (NYSE). It triggered a rapid erosion of confidence in the U.S. banking system and marked the beginning of the worldwide Great Depression that lasted until 1939, making it the most devastating crash in the country's history. It is most associated with October 24, 1929, known as "Black Thursday", when a record 12.9 million shares were traded on the exchange, and October 29, 1929, or "Black Tuesday", when some 16.4 million shares were traded.

The "Roaring Twenties" of the previous decade had been a time of industrial expansion in the U.S., and much of the profit had been invested in speculation, including in stocks. Many members of the public, disappointed by the low interest rates offered on their bank deposits, committed their relatively small sums to stockbrokers. By 1929, the U.S. economy was showing signs of trouble; the agricultural sector was depressed due to overproduction and falling prices, forcing many farmers into debt, and consumer goods manufacturers also had unsellable output due to low wages and thus low purchasing power. Factory owners cut production and fired staff, reducing demand even further. Despite these trends, investors continued to buy shares in areas of the economy where output was declining and unemployment was increasing, so the purchase price of stocks greatly exceeded their real value.

In the United States, the Great Depression began with the Wall Street crash of October 1929 and then spread worldwide. The nadir came in 1931–1933, and recovery came in 1940. The stock market crash marked the beginning of a decade of high unemployment, famine, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth as well as for personal advancement. Altogether, this period represented a traumatic loss of confidence in the economic future.

The usual explanations include numerous factors, especially high consumer debt, ill-regulated markets that permitted overoptimistic loans by banks and investors, and the lack of high-growth new industries. These all interacted to create a downward economic spiral of reduced spending, falling confidence and lowered production.Industries that suffered the most included construction, shipping, mining, logging, and agriculture. Also hard hit was the manufacturing of durable goods like automobiles and appliances, whose purchase consumers could postpone. The economy hit bottom in the winter of 1932–1933; then came four years of growth until the recession of 1937–1938 brought back high levels of unemployment.

An economic depression is a period of carried long-term economic downturn that is the result of lowered economic activity in one or more major national economies. It is often understood in economics that an economic crisis and the following recession that may be termed an economic depression are part of economic cycles where the slowdown of the economy follows economic growth and vice versa. It is a result of more severe economic problems or a downturn than a recession itself, which is a slowdown in economic activity over the course of the normal business cycle of growing economy.

Economic depressions may also be characterized by their length or duration, showing increases in unemployment, larger increases in unemployment or even abnormally large levels of unemployment (as with for example some problems in Japan in incorporating digital economy, that such technological difficulty resulting in very large unemployment rates or lack of good social balance in employment among population, lesser revenues for businesses, or other economic difficulties, with having signs of financial crisis, that may also reflect on the work of banks, or may result in banking crisis (in various ways that may be for example unauthorized transformations of banks), and further the crisis in investment and credit; that further could reflect on innovation and new businesses investments lessening or even shrinking, or buyers dry up in recession and suppliers cut back on production and investment in technology, in financial crisis that may be more country defaults or debt problems, and further in feared businesses bankruptcies, and overall business slowdown. Other bad signs of economic depression could be significantly reduced amounts of trade and commerce (especially international trade), as well as in currency markets that maybe fluctuations or unexpected exchange rates with observed highly volatile currency value fluctuations (often due to relative currency devaluations). Other signs of depression are prices deflation, financial crises, stock market crash or even bank failures, or even specific behaviour of economic agents or population, that are also common or also non common elements of a depression that do not normally occur during a recession.

On 20 February 2020, stock markets across the world suddenly crashed after growing instability due to the COVID-19 pandemic. The crash ended on 7 April 2020.

Beginning on 13 May 2019, the yield curve on U.S. Treasury securities inverted, and remained so until 11 October 2019, when it reverted to normal. Through 2019, while some economists (including Campbell Harvey and former New York Federal Reserve economist Arturo Estrella), argued that a recession in the following year was likely, other economists (including the managing director of Wells Fargo Securities Michael Schumacher and San Francisco Federal Reserve President Mary C. Daly) argued that inverted yield curves may no longer be a reliable recession predictor. The yield curve on U.S. Treasuries would not invert again until 30 January 2020 when the World Health Organization declared the COVID-19 outbreak to be a Public Health Emergency of International Concern, four weeks after local health commission officials in Wuhan, China announced the first 27 COVID-19 cases as a viral pneumonia strain outbreak on 1 January.

Lulu (composed from 1929 to 1935, premièred incomplete in 1937 and complete in 1979) is an opera in three acts by Alban Berg. Berg adapted the libretto from Frank Wedekind's two Lulu plays, Erdgeist (Earth Spirit, 1895) and Die Büchse der Pandora (Pandora's Box, 1904). Berg died before completing the third and final act, and the opera was typically performed as a "torso" until Friedrich Cerha's 1979 orchestration of the act 3 sketches, which is now established as the standard version. Lulu is notable for using twelve-tone technique during a time that was particularly inhospitable to it. Theodor W. Adorno praised it as "one of those works that reveals the extent of its quality the longer and more deeply one immerses oneself in it."

The opera tells the story of Lulu, an ambiguous femme fatale in the fin de siècle, through a series of chiastic structures in both the music and drama alike. Introduced allegorically and symbolically as a serpent in the prologue, she survives three dysfunctional marriages while navigating a network of alternately dangerous and devoted admirers. Her first husband, the physician, dies of stroke upon finding her in flagrante delicto with the painter. Her second husband, the painter, dies by suicide when he learns that she is being married off and has been sexually exploited since childhood by the businessman, among others. This latter man, she says, was "the only one" who "rescued" and "loved" her. She convinces him to become her third husband but kills him when he becomes paranoid and violent. She escapes prison with the help of her lesbian admirer, the Countess Geschwitz, and they flee to London with her lover (and last husband's son) Alwa. But they are ruined by a stock market crash, reducing her to prostitution. One of her clients beats Alwa to death, and the next, Jack the Ripper, murders Lulu and Geschwitz.

Black Monday (also known as Black Tuesday in some parts of the world due to time zone differences) was a global, severe and largely unexpected stock market crash on Monday, October 19, 1987. Worldwide losses were estimated at US$1.71 trillion. The severity sparked fears of extended economic instability or a reprise of the Great Depression.

Possible explanations for the initial fall in stock prices include a fear that stocks were significantly overvalued and were certain to undergo a correction, persistent US trade and budget deficits, and rising interest rates. Another explanation for Black Monday comes from the decline of the dollar, followed by a lack of faith in governmental attempts to stop that decline. In February 1987, leading industrial countries had signed the Louvre Accord, hoping that monetary policy coordination would stabilize international money markets, but doubts about the viability of the accord created a crisis of confidence. The fall may have been accelerated by portfolio insurance hedging (using computer-based models to buy or sell index futures in various stock market conditions) or a self-reinforcing contagion of fear.