Money From The People Holding Stocks example essay topic

The Stock Market Crash In 1987, the DOW lost 500 points. This was a major occurrence and many countries worldwide were suffering the same thing. Even at that time there was a lot of concern when the DOW goes down that much, because the usual reaction is a depression. This however was not even close to the disastrous events that were eminent after the depression of 1929.

As a matter of fact there are measures to make sure this sort of thing never happens again. Federal Deposit Insurance Corporation was created after the depression to ensure this would not happen again. The crash had happened with many people who had seen it coming. But the business were making money at the time so they had much less concern.

The stock market is a very interesting tool for business's. Most capital in the United States was represented in stocks at the time. Capital is the tools needed to make things of value from basic raw material, such as a building or a machine. Owners of the corporations took stocks into the form of shares of stocks, which are essentially apart of the company. These stocks were then sold on the Stock Market.

A lot of hope was riding on the stocks of many men. They had even borrowed to get the stocks. From 1920 to 1929 stocks nearly quadrupled in value. This shows how much faith a man must have had in a stock after it being worth so much.

What made the market popular was the fact that you could go to a broker and purchase stock on margin. This made it so that they could buy them on credit and pay cash upfront for some of it. Now the economists knew about this and had been very worried seeing the frenzy for people playing the stock market. The Government also sort of knew what was happening but in a way decided to let things be for they might be held accountable if things were not going so well. The first decent of The Crash was on October 24, 1929.

On this day alone 12,894,650 exchanged hands. This on Wall Street was unheard of. On an average day 3,875,910 were exchanged and this was when the market was at a very high playing field. At the time many ordinary people were even getting a piece of the action.

The ticker tape was in use and it was backing up information by an hour to an hour and a half. One important aspect was the banks trying to get the money from the people holding stocks with little or no value left. This made people buy less and the demand for things went down because people did not want to buy much after the stock crash. Now even if they tried to make money, no one wanted to buy any stock at that time after losing money. When people learned of the huge bank losses they thought that they were going to run out of peoples money and not be able to pay people off. This made people go in a rush to banks and withdraw all their money after losing all the faith in the banks.

Unable to raise fresh funds from The Federal Reserve banks ended up closing by the hundreds. Any business opening could not get a loan. No one would accept checks at the time because they were basically worthless. A lot of bank action basically ceased. Roosevelt proceeded to give the banks a three day holiday to recover from the losses and reopen. When they did open they made strict withdrawl limits and cautiously watched their step.

This is where the Federal Deposit Insurance Corporation came in and made it so that banks were unable to run out of money. So if the bank did go out of business it would reimburse depositors. This is what makes the huge market stay at a better plateau and not fluxuate so much. web.