Fear sells. No one knows this better than the media.
News outlets seem to be in a competition to top each other with the next dismal prediction and headline.
A media group recently went as far to refer to the economy as teetering on a Great Depression.
Let’s set the record straight.
Historians call October 24, 1929 Black Thursday. On this day, people started getting rid of their stocks as fast as they could. Sell orders flooded market exchanges and the bull market unexpectedly shifted to a bear market.
Bank deposits were uninsured and thus when banks failed people simply lost their nest egg. Surviving banks, uncertain of the economic situation and concerned for their own survival, stopped being as eager to make new loans. Bankers were apparently urging joined interests to purchase stocks at current levels. In addition to banking support, significant purchasing was reported from investment trusts, utility operators, large individual investors, and some small investors.
Black Tuesday , October 29th, 1929 – is the date that the majority of historians concur dealt the last blow to the Roaring 20s and was the starting point of the Great Depression. On Black Tuesday, a record 16.4 million shares changed hands.
Black Tuesday marked the inauguration of the Great Depression, a decade of economic poverty in the United States lasting from 1929 to 1939. On Black Tuesday the Dow Jones Industrial Average lost just about 12% of its worth after having lost almost 13% the preceding day on Black Monday. The Great Depression contributed to the formation of most regulation still in force nowadays.
Markets started to decline precipitously, leading to further dumping. Investors could not pay the interest on their margin accounts causing the banks that had loaned the money to go out of business. Stock prices dropped to new lows. During the day, Seattle stock exchanges and local stockbroker’s offices were densely packed with tense stockholders witnessing the collapse. Stock prices were run up to very high levels prior to Black Thursday, which everyone knew (so we are told) were unsustainable. It also was the first time in investing history that masses of stock traders were allowed to borrow on margin in order to purchase stocks.
Stocks dropped so much, that at a lot of times throughout the day no buyers were existing at any price. Markets lost nearly $16 billion in the month of October or 18% of the beginning of the month value. Twenty-nine public utilities lost $5.1 billion in the month.
Four Particulars Media Loves To Overlook About Why There Will Be No Great Depression
1 – Bank account deposits are insured. In fact, one of the initial things President George Bush did at the start of the recession was to raise the amount your bank account is insured. The public will never just lose all their savings for the reason that a bank fails like they did in the Great Depression.
2 – Margin accounts are now regulated. There are margin call limits nowadays that stop excessive risk in the stock market by average traders. Banks cap margin borrowing. A person has to fill out a special application for a margin account and show some knowledge of trading first.
3 – Banks which are large are not allowed to fail like they were during the Great Depression. Government action saved all the largest banks from collapse.
4 – The stock market is not permitted to plummet too much in a given period of time. Trading halts or breaks are forced in times of panic selling like immediately after 911. Additionally breaks are placed on SHORT selling like how the SEC temporarily restricted short-selling on more than 790 financial stocks on September 19th, 2008.
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