Do you know the first ever share market was established in 1602 by the Dutch East India company under the name of Amsterdam Stock Exchange. Today it is known as Euronext Amsterdam. In general terms, it is a sudden and unforeseen collapse of stock prices across a stock market, resulting in a significant loss of wealth. Crashes are generally associated with bear markets. We have witnessed many market crashes from historic times to the modern period, some are moderate and some are worse. From the crisis of 1929 to the Euro zone Crisis, we will take a brief look at some of the tense and worse times in share market history.
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26. Kipper und Wipper
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In 1923, the State of Germany went through a major hyperinflation, causing a considerable amount of internal political instability, losing important territories in the hands of foreign troops, and ultimately leading to the miserable state of the general public. In Germany, the memories of 1923 disaster are still somewhat fresh. But, it wasn’t the first time the region has experienced a large scale economic catastrophe.
In the 17th century, sometime between 1621 to 1623, under the weakened banner of the mighty Roman Empire, Germany witnessed one of the oldest currency crises in the Europe. The crisis was caused due circulation of debased foreign coins in the region. The name is of course of German origin and refers to the tipping scales which are used to recognize genuine currency. One interesting fact about Kipper und Wipper is that only metal coins was debased not the paper money.
25. Tulip Mania
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Tulips have a significant relevance in the Dutch history. It was introduced in the country around 1594, which eventually lead to massive tulip market in Northwestern Europe and the famous Tulip Mania Bubble in 1637. It was an important period in Dutch history during which the increasing popularity of Tulip bulbs resulted in hike in their demands causing an exceptional price rise and then went down drastically. The impact of the Tulip Mania bubble was so huge that today the term ‘bubble’ is used to refer any economic situation when asset prices deviate from the company’s valuations.
24. The Mississippi Bubble
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After the death of Louis XIV in 1715, the French monarch was nearly bankrupted due to a series of deadly wars. Things didn’t change later either. In 1716, after gaining the support of the Monarch, John Law established the Banque Royale in France. It was the first ever central bank in France.
Also among the first few banks to issue paper money in Europe. Later, the Bank was merged with the Company of the West and the Companies of the Indies. All were known as the Mississippi Company. In just a few years, his company had a total monopoly over French colonial trade.
It was during this time, due to the immense profits involved, share prices of the company skyrocketed. The French government then took advantage of this situation by printing increased amounts of paper money. This went on until the excessive issue of paper money ignited inflation, in which the currency began to lose its face value.
23. Bengal Bubble of 1769
The East India Company invade the Indian state of Bengal in 1757. With the help of Mir Jafar, the Nawab of Bengal, the company became more powerful in the province by taking control over the taxation rights in the state from the weakened Mughal Empire. It was shortly after that Bengal experienced a major economic crisis. The crash was caused by the overvaluation of East India Company stock during that time.
Many studies have indicated that the great Bengal famine of 1770 and attack on Company holdings by Hyder Ali a year before in 1769, were the main causes of the crash, but it was later accepted that the primary cause was the exploitative governance of the province by the company. The Bubble also had a drastic effect on Indian textile industry, causing its collapse in the 18th century.
22. Financial Crisis of 1791
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The First Bank of United States was created in December 1970. During its IPO or initial public offering, investors had to pay $25 for a share, and were required to make three additional installments in six-month intervals totaling $375. These payments were to be 25% in hard cash and 75% in US debt securities.
One of the root causes of the crisis was the fiasco of a controversial plan to use large loans to gain control of the US debt securities market because the investors needed those securities to make payments on stocks in the Bank of the United States.
21. Panic of 1901
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The Panic of 1901 was a significant event in the United States as it was the first stock market crash on the New York Stock Exchange. The panic was caused due to a major power struggle between elite business men for control over the Northern Pacific Railway.
It all started when, E. H Harriman, chairman of the Union Pacific Railways, in his efforts to gain control started buying up stocks of Northern Pacific Railway. The panic affected major stocks included Union Pacific, Missouri Pacific and United States Steel.
20. Panic of 1873
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In 1873, a major financial crisis hit the entire Northern Hemisphere that triggered a dejection in Europe and America that lasted six years from 1873 until 1879. The Panic lead to depression had several major reasons. Firstly, and most importantly Post-Civil War inflation in America, then other contributing factors like uncontrolled risky investments in railroads, the demonetization of silver in Germany and the US, economic dislocation in Europe resulting from the Franco-Prussian War. In Europe, the first symptoms of the crisis were financial failures in Vienna, which spread to most of Europe by 1873.
It was perhaps the worst economic meltdown in Brazil and the whole of South America. The “Encilhamento” developed in the 1880s and remained until the early 1890s, then exploded during the regime of Deodoro da Fonseca leading to the financial crisis.
In order to encourage a massive industrialization in Brazil, the government adopted a destructive policy of unconditional credit for investment in industries, which eventually was supported by an ample issuance of legal currency. Although the crisis occurred between 1890–92, its political and mostly economic consequences were experienced throughout the entire decade.
18. Recession of 1937
America’s national economy took a sharp decline in 1937, which lasted for 13 months. The crisis drained the national economy, causing a decline in industrial production to almost 30 percent. Unemployment rocketed from 14.3 percent in 1937 to 19.0 percent in just one year.
Similarly, manufacturing output fell by 37%. To make things better and elevate the situation, Roosevelt’s government introduced the Agricultural Adjustment Act of 1938, which authorized crop loans, insurance against natural disasters, and large subsidies to farmers who cut back production.
17. 1974 Stock Market Crash
The 1974 bear market affected almost all stock markets in the world, but, most significantly the London Stock Exchange. It hit the U.S markets after collapse of the Bretton Woods system and the dollar devaluation. It was behind the 1973 oil crisis later in that year.
16. Japanese Asset Price Bubble
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After the World War II until the end of the Cold War, Japan enjoyed the “Economic Miracle” where it became the world’s second largest economy. But, in the late 1980s, the country suffered one of the worst economic crisis in Asia. The Japanese Bubble Economy is attributed to unprecedented hike in stock and real estate prices driven by speculative madness. This economic collapse pushed the country into a severe financial crisis and a long period of economic stagnation infamously known as the “Lost Decades.”
15. Asian Financial Crisis of 1997
The Asian Financial Crisis of 1997 originated from Thailand, when the Thai government declined to peg the currency to the U.S. Dollar. Thailand had acquired a load of foreign debt to the extent that made the country almost bankrupt. As the crisis spread, many of Southeast Asian countries, including Japan witnessed slumping currencies, devalued stock markets and other asset prices. Timely intervention by the IMF and World Bank eases the growing panic in this part of the world.
14. Russian Financial Crisis of 1998
In 1998, a major financial crisis in Russia hit the country’s economy. There were several reasons behind this crisis, including Declining productivity, and most importantly, a high fixed exchange rate between the ruble and foreign currencies. It prompted the Russian government and the Central Bank to devalue the ruble while defaulting on its debt. The Russian crisis of 1998 also had some negative impacts on the economies of its neighboring countries.
13. Wall Street Crash of 1929
The Wall Street Crash of 1929 goes by many names, most famously the Great Crash of 1929. Began, on October 24, 1929 it soon became one of the most devastating stock market crashes in the United States. The crash followed the London Stock Exchange’s crash in September, and marked the beginning of the 10-year Great Depression that affected all industrialized countries in West. One of the key factors that caused the Crash of 1929 was the overproduction of agricultural stock leading to a widespread financial despair among the farmers.
12. Aftermath of September 11 Attacks
The September 11 attacks in the financial capital of America did a serious economic damage. The opening of NYSE was first delayed and then canceled due to two successive plane crashes into the World Trade Center. The after effects were seen in European markets, when they were interrupted due to fear of follow-up terrorist attacks. It was estimated that almost $40 billion were alone insurance losses. Other losses included business interruption, liability, compensation etc.
11. 2002’s Stock Market Downturn
It started in March 2002, when stock markets across the three continents took a sharp downturn, including Asia, North America and Europe. Ever since the 9/11 attacks in 2001, the major world markets had not been able to pick up. And it carried on into the next financial year. But in 2002, things became much worse when major market indices fell rapidly in very less period of time. The 2002 downturn can be considered as a part of a bigger bear market that first hit in the year 2000. By July, some big players like The Dow and S&P 500 were down by 25 percent and 27 percent respectively.
10. Chinese Stock Bubble of 2007
After the rumors that the Chinese government is going to raise interest rates in a desperate attempt to control inflation and they also planned to hold down on speculative trading with borrowed money, the Shanghai Stock Exchange collapsed a staggering 9%. The drop in the biggest Asian market sent shock waves throughout the globe.
9. Dot-com Bubble
The arrival of “dot com” age indicated the entry of a “new economy”. The five year period between 1995 to 2000 was marked by the founding of several new online based companies including Amazon and eBay. The IPOs of these companies blasted market expectations and forecasts, sweeping the entire world in exhilaration.
Investors were blindly trusting new companies and gripping every new issue without proper evaluation of their investment’s future. Many argue that the dotcom bust was a typical case of too much too fast. Many smaller companies were provided with millions of dollars in a little time to compete with the big ones causing catastrophic failures.
8. Financial Crisis of 2007-2008
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It all started in 2007, with a setback in the loan market in the US. Soon, it became one of the calamitous international banking crisis in the world with the demise of the many firms and investment banking giant Lehman Brothers. To tackle the possible collapse of financial systems in future, institutional bailouts and other strict monetary policies were deployed.
7. 2009 Dubai World Debt
After a magnificent six year boom in Dubai’s real estate market, it suffers a terrible financial crisis in 2008- 2009. At the center of this crisis was the multi billion dollar company Dubai World. At that time, Dubai World had a total debt of $59-billion, which is nearly three-quarters of the UAE’s US$80-billion debt.
This includes a US $3.5 billion loan which the company was unable to pay before its deadline. Things went so bad that officials in the United Arab Emirates were required to calm investors and the public over the Dubai World debt crisis.
6. 2010 Flash Crash
The Flash crash of May 6, 2010 lasted just for 36 minutes, but it was deadly. Indices such as Dow Jones, Nasdaq Composite and S&P 500 all suddenly collapsed and then quickly rebounded. This resulted in a massive loss of wealth. The Dow Jones reported the biggest intraday point drop in its history, dropping 9% within a couple of minutes. However it recovered most part of the loss before the trading ended for the day.
5. 2015-2016 Stock Market Selloff
It began in the United States on August 18, 2015, when the Dow Jones Industrial Average fell 33 points and went further down on August 21, 2015, falling 531 points. But, major setback occurred on August 24 as the Dow opened 1,000 points down. However, the index gained back some of what it had lost to close down 588 points. This market uncertainty was attributed to accumulation of several things, including China’s slowdown, uncertainty in Greece and the rest of the Eurozone, the stronger dollar, the prospect of higher interest rates, false valuation, etc.
4. Stock Markets fall in 2011
The European debt crisis in Spain and Italy, as well as speculations over France’s credit rating added with the stagnant economic growth of the United States, were the main reasons behind the stock market fall in 2011. This affected many major stock exchanges across the United States, central Asia and Europe. In America, the S&P 500 was down to 6.7%, the Dow Jones Industrial Average to 5.6%, adding to a nearly US $2.5 trillion erased from global equities.
3. Chinese Stock Market Disaster
The Chinese stock market failure occurred on June 12, 2015 that almost crippled the Chinese economy. It was so rapid that within a month, the Shanghai Stock Exchange lost its one third of the value of A class shares. By July 2015, the SSE had fallen 30 percent and nearly half of its listed companies vouched for a trading halt to stop further losses. The market was again hit by aftershocks around 27 July and 24 August also known as “Black Monday“. After three stable weeks the Shanghai index fell again on 24 August, marking the worst fall since 2007.
2. Eurozone Crisis
Ten years after the creation of the Eurozone, major Euro countries like Greece, Portugal, Ireland, Spain and Cyprus witnessed one of the dreadful debt crisis in the modern history. The European debt crisis exploded slightly after the Great Recession in late 2009, which was characterized by structural defects in the government and skyrocketing debt levels. Several Eurozone member states were unable to repay their government debts.
It was only after 2010, that leading European nations implemented a series of financial support measures such as the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM) to prevent any major financial crisis in the region in future.
1. Aftermath of United Kingdom’s EU Referendum
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The UK EU membership referendum and UK decision to leave the European Union, erupted a political and Economical upsets throughout the Europe with major effects over the other economies worldwide. Globally, more than US $2 trillion worth equities were wiped out of the markets with the highest one-day sell-off in recorded history. The stock market losses mounted to a total of US $3 trillion by June. By that time the FTSE 100 index had already lost £85 billion. There is also a huge uncertainty over future economical implication of Brexit.