Article Review Assignment: 1929 Wall Street Crash (Essay Sample)

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Article review
1929 Wall Street Crash
In the 1920s, there was an upward spiral of share prices on the New York Stock Exchange that slowly begun to plummet in 1929. However, before this event, the stock market had hit an all-time high, and by August 29, economists and leading bankers preached optimism causing a buying frenzy. All this while, no one questioned the bull market, and a temporary economic slowdown passed obliviously to most of the investors at the time. The investing bubble ended in a shattering bust. Anxious investors heard rumors on the imminent decline of stock prices causing the rampant sale of stocks and a sharp decrease in the stock prices. Rumors continued to swirl, and by Monday, October 28, 1929, the Dow Jones recorded a thirteen percent decline. The following day, October 29, 1929, over 16 million shares were sold creating the Black Tuesday.
The stock market crash of 1929 was a result of combined events; manmade, government policies and increased buying on credit. People bought stocks on margin, allowing everyone to buy the stocks including those who did not have the initial cash creating an irrational enthusiasm. After the crash, people sold their business and lost their life savings in an effort to repay off their margins from stockbrokers. The effects rippled onto other sectors of the economy. There was a sharp decline in wages, economic growth, and global trade and a rise in unemployment.
Some of the lessons learned from the 1929 crush are; the banks, stock markets, and the economy are interlinked, and governments should always have policies set in place to help regulate similar occurrences.
1973 Oil crisis
During the 1970s, the Middle East experienced problems, which became significant in 1973 when Arab Oil producing countries imposed an embargo. The aim here was to punish Western nations, specifically America for supporting Israel in the Yom Kippur war. This move caused the price of oil to increase significantly from $3 to $12 per barrel. Americans had enjoyed decades of abundant supply and did not anticipate the hikes and fuel shortages. The upward spiral in oil prices had global implications; firstly, consumers were required to keep up with new skyrocketing costs and national economies had to make structural changes that threatened their stability. Unlike the western nations, the Europeans and Japanese had stocked some oil reserves that provided a short-term cushion but did not eliminate the long-term uncertainties. One of the key lessons gained from the oil crisis is the consideration of other energy sources as well as other free energy markets.


​Notes: mbd = million barrels per day; production refers to crude oil; consumption, to all oil-derived refined products.Source: BP. 2013. Statistical Review of World Energy 2013. Excel worksheets, 1951–2011. London: BP.

1987 Black Monday
One of the largest stock declines in history resulting from a chain of reactions caused stock prices to plummet in a matter of hours in the summer of 1987. Economists identified possible causes of Black Monday Events: international investors increasing their activity in the US markets accounting for appreciation in stock prices and the introduction of portfolio insurance that extensively used options and derivatives. As a result, many business leaders experienced extensive losses in terms of the market value of their companies. The event did not plunge the country into a great depression but left investors with invaluable lessons. First, an investor should not be quick to react to the daily movement of stocks and a decline in stocks is not always a bad thing.
1989 –1991 –US Savings and Loan Crisis
The savings and loan crisis was the largest bank downfall caused by a failure of over 1000 of the nation’s savings and loans. More than half of the failed saving and loans were from Texas compelling the state into recession. S&L banks offered their clients low interest and used federally insured deposits to fund mortgages. With time, the money market grew and offered higher interest rates on savings. Consequently, investors began pulling money out of their savings thus depleting these banks of cash reserves. With more than $500 billion in failed assets, the crisis cost the taxpayers a $132 billion; shifting most of the burden to the taxpayers. Based on this debacle, it is evident that overregulation by any government is detrimental since it inhibits institutions from adapting to the prevailing market conditions.
1994 Economic Crisis in Mexico
The economic crisis in Mexico also known as the December mistake resulted from a turnaround of stiff policies on money control. In December 1994, the Mexican government devalued the Peso. One of the leading causes of this crisis was President Salinas’s strategic decisions that pushed the country into stressful economic conditions. These strategies caused an overvaluation of the exchange rate and a deficit in the then Mexican financial system. As a result, the value of the Peso had fallen by over fifty percent while inflation rose by 52% 1n 1995 from 7% in 1994. Further, there was an acute shortage of loans since financial institutions struggled with bad loans and wanted to create reserves to prevent total collapse. To avoid similar occurrences, prudential monitoring of financial institutions is very crucial to developed countries.
1997 Asian Financial Crisis
Excessive borrowing by the private sector caused the Asian financial crisis. Owing to high rates of economic growth and a thriving economy, private firms sort to finance upcoming projects. However, firms overindulged in borrowing and because of depreciation combined with other factors, they struggled to make payments. The crisis was caused by a huge increase in foreign debt ...