The — bear market was a severe bear market that lasted between January and December The period saw also the failure of major international banks such as Franklin National in the US and Herstatt in Germany, as well as the secondary banking crisis in the UK. The oil crisis , recession and financial instability combined to create the sharpest fall in global share prices since the Great Depression and World War Two.
Like the s and s, the decade of the s was a period of remarkable prosperity in the U. While the s included several periods of stagnation and recession, the following decade was a period of nearly unblemished prosperity.
The economy grew at a brisk pace and employment and wages grew at good rates.
– stock market crash - Mises Wiki, the global repository of classical-liberal thought
America was able to fight the Cold War , the Vietnam War , the war against poverty, and win the space race, simultaneously. The only noticeable negative effect was a mild uptick in price inflation. Credit for the expansion was given to two primary factors. The first factor was scientific management of the economy by the "new economists", Keynesians , who were brought to Washington to help fine-tune the economy with fiscal and monetary policy.
The second factor was the new technology that was introduced into the economy, particularly computer technology, consumer electronics, and technological advances related to space exploration. Right before the crash he described the economic expansion as "unparalleled, unprecedented, and uninterrupted.
More importantly, revolutionary changes occurred in money and banking. Treasury stopped issuing silver coins in and Gresham's Law insured that Americans were soon using nothing but clad coins that only looked like the old silver coins.
Silver certificate notes were recalled in and replaced by Federal Reserve notes. In August of , Nixon initiated a "new economic policy" that closed the international gold window.
Despite his promises to the contrary, Nixon also instituted comprehensive wage and price controls in an attempt to block the rising price inflation before his reelection campaign.
Wall Streets Worst Market Crashes by Worst Stock Market Crashes
The Bretton Woods system , where currencies had fixed values in terms of gold, inevitably collapsed. Thus the last links between gold and U. The bubble of the s and subsequent collapse have been well chronicled by John Brooks in his book, The Go-Go Years.
The " go-go 60s " refers to the market for technology stocks during the s when the " Nifty Fifty " emerged as a list of "one decision" stocks that could be bought and held forever.
This list of stocks included Coca-Cola and IBM as well as troubled companies of today, such as Xerox and Polaroid. Like the investment trusts of the s, mutual funds were touted as the fastest path to riches for the common man. As the bubble expanded, investment gurus such as Gerald Tsai used aggressive investment techniques to generate huge increases in the value of their mutual fund shares, while others made millions building the conglomerate corporations that spanned many industries and nations.
Brooks well captured the euphoria that emanated from this new-era stock market: Tsai and others like him seemed to have invented a money-making machine for anyone with a few hundred or several thousands of dollars to invest. The experiments of the new economists also resulted in higher price inflation, as would be expected from the "stimulating" fiscal and monetary policy of the s.
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From the beginning of to the beginning of the consumer price index increased by From —when the experiment began in earnest—to the end of the CPI increased by The experiment had tripled the rate of inflation experienced by consumers. However, the real losses in the stock market were larger and longer lasting than an ordinary chart of the Dow might suggest. If the value of stocks is adjusted by price inflation as measured by the Consumer Price Index , a clearer and more disturbing picture emerges.
Dow Industrials: Bear Market
This indicates that the economic pain of the s and early s may have more closely resembled that of the Great Depression of the s than previously thought. While not recognized in the statistical senses as a decade of depression, and certainly not as a great depression, the decade was nonetheless a period of economic gloom and despair that was compounded by Watergate and defeat in Vietnam. From Mises Wiki, the global repository of classical-liberal thought.
Philip Davis "Comparing Bear Markets - and " , National Institute Economic Review , doi: This article is a stub. You can help Mises Wiki by expanding it. Retrieved from " https: Financial crises Article stubs.
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