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The 2007-2008 financial crisis
The 2007-2008 financial crisis
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More handpicked essays just for you.
The 2007-2008 financial crisis
The 2007-2008 financial crisis
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Recommended: The 2007-2008 financial crisis
The problem was that many people that bought stock bought their shares on a type of credit in which they paid part of the amount required and planned on paying the rest after they sold their share. When the stock market crashed, shares were worth nothing and the investors could not afford to pay the remaining balance of the original purchase price. Moreover it was common for people to borrow money from banks to buy stock so it became a problem for the banks when the population could not pay back their
This being the cause of prices concerning stocks and shares to increase, to the point that it was nearly impossible to invest in the market. This being a factor in causing companies to terminate their employees swiftly, and if an individual remained employed, their wage decreased dramatically below the minimum wage. Many counterparts had invested in the stocks with loans or borrowed money, and when the market crashed, their share had been utterly wiped out, leaving them with absolutely no money. Individuals who had their money in banks, became skeptical of the banks and started to withdraw their money, to preserve their remaining savings. This, causing the banks to have to take out loans from bigger banks so that they could pay the individuals their money.
This continuous rising of the stock market was in a deep increase and the stock market made a lot of investors to dump their shares. Shares were sold to people, and a lot of people borrowed money from banks to buy those shares with the hope of economy getting better soon. But as time went on the stock market fall became so severe that those who borrowed money to buy shares were faced with a lot of danger. And they were finally wiped out because of how worthless their shares became in the market. The dumping of these shares by the investors put bankers in a high risk of losing money.
The purchase of a stock with hopes that the value will increase but not actually knowing it will is known as speculation, this combined with the heavy use of installment buying caused many people to fall into extreme debt, creating an unstable economy and leading to the Great Depression. Since it was no longer seen as shameful to be in debt, the American people were now taking advantage of credit and installment buying (Document 6). People wanted to maintain this new standard of living and did so by amassing large amounts of debt through this buy now, pay later system. This acceptable economic prices, combined with the speculative purchase of stocks led to a detrimental economic downfall. The prices of stock were driven up based on this speculation instead of any increase in the profits of the business (Document 5).
What’s horrifying for a businessman is to see the stock market crash. On Tuesday, October 29, 1929, the United States stock market suddenly and completely collapsed. A renowned historical disaster, Black Tuesday, is attributed by many historians to be the start of the worst financial crisis in U.S. history, The Great Depression. The Great Crash itself had a devastating impact. Hundreds of banks failed, and because bank deposits were uninsured, their depositors lost some or all of their money.
The excessive spending came to a breaking point when investors traded about sixteen million shares on the New York Stock Exchange in all but one day. Billions of dollars went down the drain in result of the trades and thousands of investors went bankrupt. Speculators got a rude awakening once they lost all of their money in hopes of gaining more. Harry J. Carmen considers speculation as “the final development that set the stage for the collapse of American prosperity” (Doc 5). So much chaos happened in so little time due to speculation and that was just one reason behind the economy collapsing.
For example, In Document five it states that in 1929, a collapse of the American Prosperity happen. Which means people was putting a lot of their money into securities hoping to the make the stocks rise. People began gambling which made a lot of them go into debt (Harry J. Carman and Harold C. Syrett, A History of the American People, 1952). Also a lot of people were speculating, meaning investors was putting money towards stocks hoping to gain, but risking a loss. By 1931, six million Americans could not find work.
The companies kept pushing higher prices than what their products were really worth. This lead to the stock market crash. This meant workers were fired, wages cut, and business went out of business. After the stock market crashed, Americans lost trust in their banks to hold their
In Gerald Graff’s article “Hidden Intellectualism,” from the 2003 copy of They Say I Say, the author explores the idea of what true intellectualism is by recalling pieces of his childhood. The way schools and society view intellectualism comes in to questions as being one sided or false altogether . There remain several sides to the argument regarding education and include anything regarding what should be taught, how it should be taught, and what marks the mastering of a subject. With true education as well as the proper way to teach being a heavily debated topic of controversy, the question of the right way to teach is heavily sought after. Public education has always been a topic of intense controversy in the United States since its early founding years.
The stock market that had for long been viewed as a path to wealth and richness was now a sure path to bankruptcy. The stock market was not the only one that was affected; actually, that was just but the beginning of the Great Depression. In effect, it was unfavorable for the clients whose money was already in the markets for investment: many banks had done that and that meant a huge loss to the clients. It was also a double loss in that though the clients lost their money, the banks were forced to close down. This is because the banks at the time depended completely on the stock market.
millions of investors lost everything, The Great Depression was in full swing, steep declines
It shows that people were now starting to become worried that the booming stock market would come crumbling down. Society saw that it was indeed too much of a great thing and the economy would not be able to last much longer on the stock market. One quote from the Great Gatsby movie, “All the bright, precious things fade so fast, and they don't come back”, is another example of the societal attitude toward the stock market right before the Great Crash. This shows that everyone was worried that the prosperous and luxurious time of the 1920’s might have been coming to an abrupt end and that it would be a long time before America would be back to that
Millions are jobless, homeless, tired, and starving. Drowning in debt, people are doing everything they can to stay alive. The stock market crashed in 1929 leaving investors bankrupt. The 20’s were a boom time and items were bought on credit, cars, houses, refrigerators, etc. After the market crashed, people lost their retirement savings and became overwhelmed with debt, and credit payments they could not make.
You wouldn't think that the stock market falling would cause such mayhem, but it did. People who were not even invested in stocks began to be affected, even in other countries. Because of the stocks falling production began to decline, which led to workers being laid off. This trying
The stock exchange slammed, banks dispossessed, organizations bankrupted and cash devalued. This affected the people of America to a great extent. So these mistakes are to be acted upon soon before it causes much more trouble. By making this mistake, people learned the valuable experience of managing money wisely and buying stocks