Do I say the stock market is confused as it rises and drops this year? Maybe it isn’t, maybe the economy is the one confused here but I can’t say for sure which is since one is completely down while the other is going in a confused state. In February 2020 which is the year of writing this post, Dow went as high as 250 points, which means the stock market went up only for it to come drastically down with a sell-off of 30% in march which was believed to exceed the pace of declines during the great depression (for those of you who do not know the great depression, let me help).
The Great Depression
It was the black Thursday, October 24th 1929, when the US stock market crashed with $12.9 million shares traded at the end of the closing bell. A lot of people tried to buy shares at a very low price thinking of a high but alas, the high never came. The prices kept on pluming and stock brokers were confused. The great depression brought the worst, it touched lives negatively as children cried when their parents lost their jobs and there was no food. 15 million Americans lost their Jobs and half of the banks in US closed up.
What Happened?
What could have caused the great depression was what most people asked. In case you did not know the decade before the great depression was called the roaring twenties, you know why, because the economy was at its best, business was good and everyone invested in the stock market. In the 1920s the agricultural sector began to collapse, which lead to increase in food prices since the lands were going bad, the bank was lending out money to people without checking if they could repay back and people were spending the loans they got from banks generously without a way to pay back not the loan and the heavy interest.
The stock market kept on going high but not for long as investors started to get a glimpse of what was going on in the economy and in the stock market and started to lose confidence in the stock market. The hilarious thing that happened was that everyone wanted out at the same time, and that was what birthed the Black Thursday. Just like the great depression was pulling its stunt in the US, it started to affect other countries knowing that the international trade just started recovering from the World War 1 and many European countries were dependent on the United State for economic growth and income as well as they were in debt to the United States since they were ravaged by the war. As the stocks went down, the US needed money to grow its economy but there was no money, other countries were dependent so they could not help bailout the US.
The Life of an average person in the world then was disheartening, there was no money to take care of the family and put food on the table for the children, people kept on losing their jobs, businesses were not employing but they kept on firing workers. People had to line up for relief foods but the food wasn’t enough to feed the population as the agricultural sector was suffering. People protested outside government offices as there were nowhere else to go, they did not have any job or place to go to. The great depression did not just come with lack of job or and stock market crashing but at the same time, disease like tuberculosis wasn’t properly cared for as the health sector wasn’t properly funded and mortality rate increased and birth rate reduced as people wanted to survive with the little available.
What do you think would happen if the great lockdown is worse compared to the great depression?