Repeating History
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1929’s Stock Market Crash v. Today’s Economy
After World War I, the United States economy went into peacetime conditions with new industries, such as automotive and radio, supporting a constantly growing stock market. By the late 1920s, that momentum had slowed due to the beginning of the Great Depression.
"In September 1929, British financier Clarence Hatry was arrested for allegations of fraud," The Corporate Finance Institute said. "The event caused a crash on the London Stock Exchange…"
Due to the instability within the London Stock Exchange, the U.S. Market became volatile, eventually leading to Black Monday. "On Black Monday, October 28, 1929, the Dow Jones Industrial Average ("Dow Jones" "DJIA") declined nearly 13 percent," according to Federal Reserve History. The next day, Dow Jones declined another 12 percent.
Due to the events of Black Monday and Tuesday in 1929, economic growth halted and the United States went into the infamous Great Depression.
In recent financial headlines, on September 6, 2024, DJIA dropped 410 points, or one percent. While this is not especially pressing, it is something to note, especially with an additional one percent drop the next day. With many Americans currently worried about a reoccurring recession, headlines that stocks are falling are not comforting news.
"The turmoil shaking global financial markets reflects a sudden fear that the Federal Reserve may have held its key interest rate too high for too long, heightening the risk of a U.S. recession," according to AP News.
Even though the chances are increasing for another stock failure like the one that caused the Great Depression, the good news is the United States' current economy is more diverse, has better regulatory frameworks, and has more safety nets in place than were available in 1929.
While these fail-safes are in place, some financial columnists still have concerns that mirror the pre-Black Tuesday era. "...Unemployment has been rising not because companies are slashing jobs but because so many people have poured into the job market," wrote AP News.
High school students need to look back on economies of the past and be observant of harsh declines in the future economy that could potentially trigger a recession. The economy is something that impacts everyone. As more high schoolers enter the workforce and take on more financial responsibilities, the economy is something that high school students will be paying attention to.