In recent months, some doomsayers have predicted there will be another market crash in 2011, and that Wall Street’s “con game” will be once again exposed. As the years have passed, it has become more apparent that we’re incapable of learning from our mistakes, as evidenced by the subprime credit meltdown that was foretold well-before it occurred. Economics, like sociology, is a fascinating study with complex twists and turns, many of which have been repeated throughout history. The following gloomy days in Wall Street history are stark reminders of its instability — and even our gullibility.
- March 14, 1907: Real estate speculation and attempted company takeovers after the San Francisco earthquake of 1906 contributed to the crash 1907, in which the Dow suffered a loss of more than eight percent, closing at 76.23. Because many people were borrowing for speculation and a large portion of the real estate in the quake-ravaged region was insured by companies in the U.K., interest rates increased dramatically. Those rates, along with uncharacteristically high real estate prices, slowed investments on capital goods. The resulting instability fed the Panic of 1907.
- October 24, 1929: An event that will forever live in infamy, the Stock Market Crash of 1929 dealt a crushing blow to the U.S. economy. Most notably, it signified the beginning of the Great Depression, which lasted all the way until World War II. The onset of the ordeal occurred on Black Thursday, when share prices on the New York Stock Exchange plummeted. In a mass panic, $5 billion vanished as almost 13 million shares were traded, more than three times the normal volume. A brief rally at the end of the day, led by Richard Whitney, head of the New York Stock Exchange, boosted confidence slightly, but ultimately failed to halt a full-blown meltdown.
- October 28, 1929: Following a better Friday, investors returned on Monday to experience another rapid deterioration. They attempted to flee the market while they could, but for many it was too late. By the end of the day, trading volumes almost reached 9.25 million and the Dow fell 13 percent (38 points), a record loss. The confidence that was established at the end of the previous week was gone, and the stage was set for the most unforgettable day of 1929.
- October 29, 1929: Black Tuesday is when the crisis reached its apex. In just a matter of a few hours, the financial gains of the previous year were eliminated, and consumer confidence tumbled. Everyone was selling and nobody was buying, causing the ticker to lag behind by almost two hours. An astonishing 16 million shares were traded on the day, a record that stood for 40 years, and the Dow closed with a 12 percent loss (30 points). The hoards of people who had previously borrowed to participate in the bull market were forced to sell their belongings in an effort to pay back their debts. Banks and businesses closes, and many American citizens would be left destitute without their jobs or any financial assistance.
- July 8, 1932: Almost three years after the dark days of October 1929, the Dow’s long and steady decline hit its lowest point, closing at 42.22, an 89 percent decrease from its peak. Although it wasn’t a one day catastrophe like the aforementioned events, it serves as a benchmark in history. Not only did it squelch any remnants of consumer confidence, but it also helped Franklin Roosevelt win the upcoming presidential election, enabling him to implement his New Deal initiatives, which some credit with eventually ending the Depression.
- October 19, 1987: One widely agreed upon conclusion hasn’t been reached regarding the events that led to Black Monday, when the Dow dropped by its largest margin in history at the time, more than 22 percent (508 points). The worldwide crash included drops of 45.5 percent in Hong Kong, 41.8 percent in Australia, 31 percent in Spain and 26.5 in the U.K., a sequence of events that spread westward. In addition to turmoil in international markets, economists have attributed it to the faltering dollar, market psychology and program trading, the latter of which was predicted by Congressman Edward J. Markey before the crash. Fortunately, the market swiftly stabilized afterward, improving by 15 percent above the closing number on Black Monday at the end of the month.
- September 17, 2001: The September 11th attacks impacted different aspects of our lives — security, defense, freedom and, of course, the economy. When the market reopened after a four-day closure following the attacks, stocks plunged to three-year lows, decreasing more than seven percent. Boeing and United Technologies, an aviation parts supplier, suffered the biggest losses. At that point, it was the biggest one-day and one-week point losses in the history of the Dow, which had previously been unaffected by the ongoing recession.
- February 27, 2007: Overshadowed by the events of the following year, the 2007 crash was quickly forgotten by those who weren’t directly affected by it. Even still, it stands as one of the largest drops point-wise in the history of the Dow. Investors sold en masse amid worries of economic growth in the U.S. and worldwide, plummeting Chinese stocks and an apparent assignation attempt on Vice President Cheney by the Taliban in Afghanistan. Fears of a major selloff had been looming for months after the Dow had reached record highs during an eight-month rally.
- September 15, 2008: With more than $600 billion in assets, the demise of Lehman Brothers, the fourth largest investment bank in the U.S., had major repercussions on the economic health of the nation. The largest bankruptcy in the history of the country, along with the sale of Merrill Lynch to Bank of America to avoid financial crisis, resulted in a 504-point drop in the Dow, and helped set forth the panic of the following weeks. The struggling AIG, formerly the 18th-largest public company in the world, was spared thanks to assistance from the government, which, among other things, immediately provided an $85 billion credit facility.
- September 29, 2008: It was a catastrophe that defined a generation on Wall Street. After the House of Representatives failed to pass Bush’s $700 million bailout plan for the ailing financial institutions, more than $1.2 trillion was gone from the U.S. stock market, the biggest decrease in the history of the Dow Jones. The biggest drop, 400 points, came in just 10 minutes, not long after it became evident the bill was going to fail.
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