<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>The great stock market crashes of the last 100 years
</TR><!-- headline one : end --><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
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1929: The Great Depression
People swarming the American Union Bank in New York in June 1931, having failed to withdraw their savings before its collapse. -- PHOTO: GETTY IMAGES
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Yes, it's been a pretty grim few weeks, hasn't it? But if it's of any consolation, the financial meltdown of 2008 is just one of several that have rocked the world. And the good news is - the world survived them all.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
A CRISIS GONE GLOBAL
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</TD></TR></TBODY></TABLE>1929: The Great Depression
THE BIG CRASH:
After the extravagance and excesses of the Roaring Twenties, the American stock market - up fivefold in five years - was getting shaky on speculative fears.
Black Thursday came on Oct 24, 1929, when the stock market began to drop for real after a month of volatility. The market fell 40 per cent between Sept 1 and Oct 31 and was down 90 per cent by July 1932.
Widespread misery and unemployment followed, with a quarter of the American workforce out of a job by 1933. The world was plunged into a global depression which lasted 12 years until World War II.
RECOVERY: War was declared in 1941, and the preparations helped bring the economy back on track.
WHY IT'S IMPORTANT: The worst depression the world has ever seen, the Great Depression, is still used as a benchmark for how far the economy can fall.
1973: The Oil Shock
THE BIG CRASH: The world's major oil producers quadrupled oil prices and announced on Oct 17 that they would no longer ship oil to the United States, its allies in Western Europe, and Japan. This was partly payback for US support of Israel in the 1973 Yom Kippur War against Syria, Egypt and Iraq.
The surge in oil prices fed into all other parts of the economy, causing a jump in inflation and exacerbating a recession that was starting in the US. This led to the first instance of stagflation, which is when people are out of jobs but prices are stubbornly high - pretty much the worst thing that can happen to an economy.
RECOVERY: Oil prices finally stabilised in the late 1970s, only to rise to a new peak when war broke out between Iraq and Iran in 1981. But prices declined gradually again after that.
WHY IT'S IMPORTANT: The Oil Shock of 1973 is brought up as a warning economic fable every time oil prices shoot up to new records.
1987: Black Monday
THE BIG CRASH: World economies seemed healthy, but worry was growing about the widening US trade deficit and a rash of investigations into insider trading.
A crisis of confidence hit on Oct 19, 1987, when jittery investors moved en masse out of stocks into safer bonds. Computers automatically cut their traders' losses by issuing such a large number of sell orders that the system lagged, causing mass panic as investors dumped stocks in the darkness before they fell by more.
That day, the Dow Jones Industrial Average plunged 22.6 per cent - the biggest percentage drop in history - wiping out US$500 billion (S$742 billion) in a single day.
RECOVERY: Trading was restricted in global markets and liquidity was pumped into the system. A fairly quick recovery followed, with the Dow rebounding to its previous level within a year.
WHY IT'S IMPORTANT:
This was the first instance of computer trading systems contributing to such a huge loss, even though macroeconomic factors were instrumental as well. Also, despite the US stock market losing almost a quarter of its value in a single day, no one really knows the exact cause.
1997: The Asian Financial Crisis
THE BIG CRASH: Crushed under the weight of speculative attacks to its currency, the Thai government ended the baht's peg to the US dollar, causing the baht to halve in value and the Thai economy to grind to a halt.
This spread quickly to most of Asia as currencies buckled, stock markets crashed and asset prices plunged. The Thai stock market dropped 74 per cent, Hong Kong's fell 23 per cent, and South Korea's lost 7 per cent in one day. Asian economies went into recession, weighing down on global growth.
RECOVERY: Despite help from the International Monetary Fund, recovery was slow and painful, and hit along the way by more economic shocks. But economies in the region finally got back on the growth track, boosted by a global boom.
WHY IT'S IMPORTANT: Learning its lesson from the financial crisis, Asia's governments built up hefty reserves and may be better insulated from the current downturn.
2001: The Dot.com Bust and 9/11
THE BIG CRASH: The rise of the Internet in 1995 heralded the creation of a completely new online market, which companies and speculators greedily bought into. But the pipe dreams dissolved quickly as newly listed start-ups folded one by one, having spent and borrowed more than they could earn in time.
Within a week in March 2000, the US Nasdaq lost nearly 9 per cent. The Dow escaped the same fate until the Sept 11, 2001 terrorist attacks, after which it suffered its worst daily and weekly losses to that point.
RECOVERY: Western countries were worst hit, especially the European Union and the US, which went into recession. But the market rebounded permanently in 2003.
WHY IT'S IMPORTANT: It's the most recent example of what happens when a bubbly stock market, pushed up by speculative activity, abruptly bursts.
2003: Sars and the Iraq War
THE BIG CRASH: The world was hit with a double whammy in 2003 with the outbreak of the Sars epidemic and the Iraq war. Asian economies, just starting to find their feet after the financial crisis of the 1990s, were forced back into slower growth and recession fears.
RECOVERY: Fairly rapid. In fact, after Sars was contained, many economies including Singapore and China embarked on a multi-year economic expansion, fuelled by growing export demand and long-delayed property booms.
WHY IT'S IMPORTANT: The downturn is still fresh in people's minds.
2008: The Credit Crisis
THE BIG CRASH: It started with the US sub-prime mortgages, which became worthless when home owners defaulted on their loans. The housing market promptly collapsed, wiping out Wall Street's revered investment banks and pulling companies, stock markets and economies around the world down with it.
In the US, more than US$1 trillion was lost in a single day when the Dow posted its biggest loss in history on Sept 29, falling 777.68 points.
RECOVERY: Nowhere in sight yet.
WHY IT'S IMPORTANT: Experts say this is the closest the world has come to rivalling the Great Depression. And it's nowhere near over yet, with the complex financial system still unwinding by the day. [email protected]
</TR><!-- headline one : end --><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
</TD></TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
1929: The Great Depression
People swarming the American Union Bank in New York in June 1931, having failed to withdraw their savings before its collapse. -- PHOTO: GETTY IMAGES
</TD></TR></TBODY></TABLE>
<TABLE><TBODY><TR><TD>
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Yes, it's been a pretty grim few weeks, hasn't it? But if it's of any consolation, the financial meltdown of 2008 is just one of several that have rocked the world. And the good news is - the world survived them all.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>1929: The Great Depression
THE BIG CRASH:
After the extravagance and excesses of the Roaring Twenties, the American stock market - up fivefold in five years - was getting shaky on speculative fears.
Black Thursday came on Oct 24, 1929, when the stock market began to drop for real after a month of volatility. The market fell 40 per cent between Sept 1 and Oct 31 and was down 90 per cent by July 1932.
Widespread misery and unemployment followed, with a quarter of the American workforce out of a job by 1933. The world was plunged into a global depression which lasted 12 years until World War II.
RECOVERY: War was declared in 1941, and the preparations helped bring the economy back on track.
WHY IT'S IMPORTANT: The worst depression the world has ever seen, the Great Depression, is still used as a benchmark for how far the economy can fall.
1973: The Oil Shock
THE BIG CRASH: The world's major oil producers quadrupled oil prices and announced on Oct 17 that they would no longer ship oil to the United States, its allies in Western Europe, and Japan. This was partly payback for US support of Israel in the 1973 Yom Kippur War against Syria, Egypt and Iraq.
The surge in oil prices fed into all other parts of the economy, causing a jump in inflation and exacerbating a recession that was starting in the US. This led to the first instance of stagflation, which is when people are out of jobs but prices are stubbornly high - pretty much the worst thing that can happen to an economy.
RECOVERY: Oil prices finally stabilised in the late 1970s, only to rise to a new peak when war broke out between Iraq and Iran in 1981. But prices declined gradually again after that.
WHY IT'S IMPORTANT: The Oil Shock of 1973 is brought up as a warning economic fable every time oil prices shoot up to new records.
1987: Black Monday
THE BIG CRASH: World economies seemed healthy, but worry was growing about the widening US trade deficit and a rash of investigations into insider trading.
A crisis of confidence hit on Oct 19, 1987, when jittery investors moved en masse out of stocks into safer bonds. Computers automatically cut their traders' losses by issuing such a large number of sell orders that the system lagged, causing mass panic as investors dumped stocks in the darkness before they fell by more.
That day, the Dow Jones Industrial Average plunged 22.6 per cent - the biggest percentage drop in history - wiping out US$500 billion (S$742 billion) in a single day.
RECOVERY: Trading was restricted in global markets and liquidity was pumped into the system. A fairly quick recovery followed, with the Dow rebounding to its previous level within a year.
WHY IT'S IMPORTANT:
This was the first instance of computer trading systems contributing to such a huge loss, even though macroeconomic factors were instrumental as well. Also, despite the US stock market losing almost a quarter of its value in a single day, no one really knows the exact cause.
1997: The Asian Financial Crisis
THE BIG CRASH: Crushed under the weight of speculative attacks to its currency, the Thai government ended the baht's peg to the US dollar, causing the baht to halve in value and the Thai economy to grind to a halt.
This spread quickly to most of Asia as currencies buckled, stock markets crashed and asset prices plunged. The Thai stock market dropped 74 per cent, Hong Kong's fell 23 per cent, and South Korea's lost 7 per cent in one day. Asian economies went into recession, weighing down on global growth.
RECOVERY: Despite help from the International Monetary Fund, recovery was slow and painful, and hit along the way by more economic shocks. But economies in the region finally got back on the growth track, boosted by a global boom.
WHY IT'S IMPORTANT: Learning its lesson from the financial crisis, Asia's governments built up hefty reserves and may be better insulated from the current downturn.
2001: The Dot.com Bust and 9/11
THE BIG CRASH: The rise of the Internet in 1995 heralded the creation of a completely new online market, which companies and speculators greedily bought into. But the pipe dreams dissolved quickly as newly listed start-ups folded one by one, having spent and borrowed more than they could earn in time.
Within a week in March 2000, the US Nasdaq lost nearly 9 per cent. The Dow escaped the same fate until the Sept 11, 2001 terrorist attacks, after which it suffered its worst daily and weekly losses to that point.
RECOVERY: Western countries were worst hit, especially the European Union and the US, which went into recession. But the market rebounded permanently in 2003.
WHY IT'S IMPORTANT: It's the most recent example of what happens when a bubbly stock market, pushed up by speculative activity, abruptly bursts.
2003: Sars and the Iraq War
THE BIG CRASH: The world was hit with a double whammy in 2003 with the outbreak of the Sars epidemic and the Iraq war. Asian economies, just starting to find their feet after the financial crisis of the 1990s, were forced back into slower growth and recession fears.
RECOVERY: Fairly rapid. In fact, after Sars was contained, many economies including Singapore and China embarked on a multi-year economic expansion, fuelled by growing export demand and long-delayed property booms.
WHY IT'S IMPORTANT: The downturn is still fresh in people's minds.
2008: The Credit Crisis
THE BIG CRASH: It started with the US sub-prime mortgages, which became worthless when home owners defaulted on their loans. The housing market promptly collapsed, wiping out Wall Street's revered investment banks and pulling companies, stock markets and economies around the world down with it.
In the US, more than US$1 trillion was lost in a single day when the Dow posted its biggest loss in history on Sept 29, falling 777.68 points.
RECOVERY: Nowhere in sight yet.
WHY IT'S IMPORTANT: Experts say this is the closest the world has come to rivalling the Great Depression. And it's nowhere near over yet, with the complex financial system still unwinding by the day. [email protected]
