A stock market
crash is a decline (often sudden) Of stock prices across a wide section of a
stock market. It results mainly into a huge loss of paper wealth. Stock market
crashes being social occurrences are mostly brought by some underlying economic
factors.
The biggest stock market crash of the United States are; starting with
the biggest in US is the wall street crash of 1929 known as 'Black
Tuesday', it began on October 24, 1929 and end up affecting other
industrialized, developed economics. Others are the 1937-1938 recession, the
Kennedy slide of 1962, the black Monday of 1987, the economic effects due to
the September 11 attacks 2001 and the last biggest occurrence was the
financial crisis of 2007 to 2008; termed the global financial crisis. It
occurred due to exposure of securities of subprime loans and the credit default
swaps issued to insure the loans and their issuers. The resulting effect was
business closures, decline in Money supply, rise in unemployment, credit
contraction and firing of workers.
Going
to Russia, the biggest and notable stock market crash was in 1998, also called
Ruble crisis or the Russian Flu. It occurs on the 17th of August of that year.
The underlying causes were chronic fiscal deficit, decline in productivity and
a high exchange rate between foreign and the local Russian currency.
Another big economy in Asia whom over the years also experience stock market
crash is the people's republic of China, the Chinese economy suffered its
biggest slump in 20 years on the 24th of august although it started from the
month of June. The Shanghai main share index cost 8.49% of its value. Billions
of pounds were lost in the international stock market.
The above
three economies responded each to financial crisis in a number of different
ways. Starting with china, the government through its media outlets encouraged
individuals to buy stocks, the China securities regulatory commission (SRC)
Puts a loan on selling stocks by stockholders owning more than 5%, a six month
loan. The government backed by the central bank, provided cash to brokers to
buy shares.
The
Russian federation on its part responded to the crises by infusing cash into
the economy. A lot of enterprises paid their debts in back wages and tax. Goods
demand by consumers rose to a very good level. Another major aid to the crisis
at that time was the rapid rise in oil prices between 1999 and 2000.
The
United States of America set three levels of thresholds each representing
different levels of decline so as to check sharp price variations. And
government had to intervene like after the collapse of 'Lehman brothers'
in 2008, a lot of banks failed (15 failed completely) while some were rescued
by the state, others acquired by the state completely.
A lot
of countries learnt lessons from the above big economies, and to cap it all,
developing economies should curb their exuberance (spending) As they rise,
financial markets need strong regulations to survive.
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