The Great Depression (1929)

The Big Crash

After the extravagance of the Roaring Twenties, the American stock market was getting shaky amidst speculative fears. Between 1 September and 21 October, the market fell by 40 percent. On 24 October 1929, the stock market began to drop drastically. It was known as Black Thursday.  By July 1932, it was down by 90 per cent.

By 1933, a quarter of the American workforce was out of job. Widespread unemployment and misery followed. It caused the world to plunge into a global depression that lasted for more than a decade until World War II.

People could be seen everywhere on the streets on Black Thursday, 24 October 1929, as the stock market crashed. (Photo courtesy of Flickr)

Recovery

World War II was declared in 1941 and the preparations brought the economy back on track.

Importance

The Great Depression, which is the worst that the world has ever seen, is still being used as a benchmark for how far the economy can fall.

The Oil Shock (1973)

The Big Crash

It began when the world’s oil producers quadrupled oil prices. On 17 October, they announced that they would stop shipping oil to the United States, its allies in Western Europe and Japan. It was a move to retaliate against US for supporting Israel in the Yom Kippur War against Iraq, Syria and Egypt in 1973.

The surge in oil prices caused a jump in inflation which led to the first instance of stagflation (people were out of jobs but prices remained stubbornly high). It was the worst thing that could happen to an economy.

Recovery

Oil prices stabilised in the late 1970s, but rose to a new peak when war broke out in 1981 between Iran and Iraq. However, it declined gradually again after the war.

Importance

The Oil Shock is brought up as a warning to the economy each time oil prices shoot up to new records.

Black Monday (1987)

The Big Crash

A dark cloud loomed across the nation as the trade deficit continued to widen and there was a rash of investigations into insider trading. On 19 October 1987, jittery investors who were hit by confidence moved en masse out of stocks into safer bonds. Computers automatically cut their traders’ losses by issuing a large number of sell orders. This caused the system to lag, creating mass panic among investors. They reacted by dumping stocks in the darkness before they fell by more.

That day, the Dow Jones Industrial Average saw the biggest percentage drop in history by 22.6 per cent, wiping out US$500 billion in one day.

Panic selling swept through Wall Street as the Dow dropped by more than 500 points. (Photo courtesy of Flickr)

Recovery

Global markets restricted trading. Liquidity was pumped into the system. Recovery was fairly rapid and the Dow rebounded to its previous level within a year.

Importance

Though macro-economic factors played a part, this was the first instance of computer trading systems contributing to such a huge loss. Also, no one knows the exact cause despite the US stock market losing almost a quarter of its value in one day.

The Asian Financial Crisis (1997)

The Big Crash

The Thai government ended the baht’s peg to its US dollar due to the speculative attacks to its currency. As a result, it caused the baht to halve in value and the Thai economy to come to a halt.

Most of Asia was affected as currencies buckled, stock markets crashed and asset price fell. The Thai stock market fell by 74 per cent, followed by Hong Kong’s 23 per cent and South Korea’s 7 per cent in a single day. Asian economies went into recession, causing global growth to slow down.

Local residents rushed to buy bags of government discounted rice with the little money they had in Jakarta, Indonesia, which was one of the countries hardest hit by the Asian Financial Crisis. (Photo courtesy of Flickr)

Recovery

The road to recovery was slow and painful despite help from the International Monetary Fund. It suffered more economic shocks along the way. But the economies in the region got back on track when they were boosted by a global boom.

Importance

Asian governments have learnt their lessons from the financial crisis and built up hefty reserves. Thus, it helps them to be better insulted from the current downturn.

The Dot.com Bust and 9/11 (2001)

The Big Crash

With the rise of internet in 1995, a completely new online market was created. Companies and investors greedily invested into it but their dreams were dissolved as newly listed start-ups folded quickly for having spent and borrowed more than what they could earn in time.

The US Nasdaq lost nearly 9 per cent within a week in March 2000. Furthermore, the terrorist attacks on 11 September 2001 caused The Dow to suffer its worst losses which weakened the economy even further.

Recovery

Western countries such as the United States and the European Union were worst hit. They went into recession. However, the market rebounded in 2003.

Importance

The crisis is the most recent example of what happens when a healthy stock market abruptly crashes when it is being pushed up by speculative activity.

SARS and Iraq War (2003)

The Big Crash

The world was badly hit by the Sars epidemic and the Iraq war. Asian economies were forced back into slower growth and recession fears, just when they were starting to recover from the financial crisis of the 1990s.

Recovery

After Sars was contained, many economies including Singapore and China embarked on an economic expansion which was fuelled by the long-delayed property booms, as well as growing demand in exports.

Importance

People remember the downturn as it is still fresh in their minds. Much has been experienced and learnt during the Sars period. As such, countries will be more prepared to combat future epidemics.

The Current Global Economic Crisis (2008)

The Big Crash

The US sub-prime mortgages became worthless when home owners defaulted on their loans. This caused the housing and property market to collapse, which wiped out Wall Street’s revered investment banks. It pulled down companies, stock markets and economies around the world along with it.

On 29 September, the Dow posted its biggest loss in history by falling 777.68 points. As a result, more than US$1 trillion was lost in a single day in the US.

The powerful Group of Seven finance chiefs discussed ways to fight the global economic crisis and to restore confidence in the financial system. (Photo courtesy of Reuters)

Recovery

Countries around the world have come up with drastic measures to counter the financial crisis but recovery is nowhere in sight yet.

Importance

According to experts, this is the closest the world has come in rivalling the Great Depression. With the complex financial system still unwinding by the day, the crisis is nowhere near over. Countries have to stay united to combat it together.

The world has come a long way and has learnt its lessons from past stock market crashes of the century. I am confident it will pull through the current financial meltdown. Let us pray the crisis will end soon. Let us remain as optimistic as we possibly can. Let us stay united together!