Black Thursday is the name given to the day in September 1869 when the stock market crashed for the first time. The crash of 1873 followed soon afterward and marked a turning point in American capitalism.
The crash of 1837 had been an ominous sign, but with Black Thursday, the public was now fully aware of the growing danger of a market crash. Before this time, traders used margin to buy stocks rather than investing their own money.
For example, if someone wanted to buy shares in a company, they would need to borrow money from a bank or other lender.
These loans were secured against the collateral – typically real estate owned by that institution – and as long as there was enough collateral, then the lender would not demand repayment until after some set period of time.
However, with Black Thursday, people realized that many institutions did not have enough collateral to guarantee their loan repayments indefinitely; they needed more capital before they could be certain that they could pay back their lenders without selling off any assets first.
As a result of this realization, investors started selling stocks rather than borrowing money from lenders; it was no longer necessary for them to sell their securities so quickly that they could not afford to wait for some amount of time before repaying their lenders and re-securitizing again.
What Caused Black Thursday?
The crash of 1873 was the result of a number of events and factors. The first, and most obvious, is that there were just too many speculative securities being created and sold to investors at the time.
Next, there was a lack of regulation in the market; as a result, many people felt they could make a quick buck off the stock market. Finally, there were economic problems caused by overproduction which sent prices plummeting.
The Stock Market Crash
of 1873 The stock market crash of 1873 was a major event in the history of American capitalism. With this event, it became clear that there were fundamental flaws in the U.S. economy and that something had to change.
For instance, if people could not trust lending institutions with their collateral for loans, then people would no longer be willing to invest in stocks and would instead borrow money from banks or other lenders.
Some experts argue that it was the government’s response to this economic crisis which allowed it to take control of the situation and steer America out of poverty during the Great Depression.
Black Thursday: The name given to the day on September 1869 when stock market crashed for the first time; example of an important economic event caused by a market crash
Aftermath of the Crash
The stock market crash of 1837 and the other crashes of the time set a precedent for the gradual decline that would follow. For example, in October of 1873, there was a small upward movement in stocks and then a sharp fall; this pattern continued until May 1884.
The decline continued steadily until October 1896 when there was an interruption with a slight rise before falling again to its lowest point on September 3rd of 1897. This pattern lasted until 1901, when the market began to rise steadily from that point on. In general,
Black Thursday marked the beginning of a new era in American capitalism where investors started focusing more heavily on tangible assets like factories and land rather than relying solely on paper investments like stocks.
Consequences of the Crash
of 1873 The consequences of the crash of 1873 were numerous and wide-ranging. In some ways, it represented an end to an era that had lasted almost a hundred years.
The market for securities began to collapse, companies that relied on capital from the financial sector became bankrupt, and a great many businesses failed in their turn.
This was particularly true for companies that had depended on the use of borrowed money; they could not repay their lenders in time and suffered huge losses as a result.
Additionally, the crash of 1873 marked the beginning of a period where politicians began to exert more control over business, as well as government involvement in economic affairs.
Cause and Effect: The Result of Black Thursday
Black Thursday was the event that marked a turning point in American capitalism. It signified a shift in how people were investing their money. The crash, which followed shortly afterward, effectively brought an end to the “robber baron” period of capitalism.
Instead of borrowing money from banks, people began selling stocks; this led to the rise of corporations and the eventual rise of modern-day marketplaces like eBay.
The Effect of Black Thursday on US Economy
The economy’s reaction to the crash was immediate. With more people selling stocks than borrowing money, the stock market crashed and many banks had to liquidate their assets in order to pay back their lenders.
As a result of this, there was a significant drop in demand for debt-based investments, so banks were forced to cut back on lending. The economy crashed as bank liquidity decreased and credit became more expensive; it was no longer profitable for business owners to borrow capital or use credit.
In addition, with the economy crashing, many corporations went bankrupt and wages stagnated. This created an unemployment issue that lasted well into the 20th century. Also, with fewer companies operating and less demand for labor, profit margins dropped significantly.
In contrast with Europe where there was also a stock market crash at about the same time but without any effect on US markets because of the low level of economic development in Europe at that time, there were few similar events that had such profound effects on American economics over the next 70 years.
Lessons Learned from the Black Thursday Crash
Black Thursday is a day that should never be forgotten. In fact, it was the first time in American history that people took the time to observe what was going on in the stock market.
At this point, it would seem as though it would have been better for investors to leave their money in the banks; however, this proved too risky for many investors and caused many of them to lose their life savings.
Thus, Black Thursday taught investors that they should diversify their investments and not rely on stocks as their sole source of income.
Conclusion
Black Thursday is a name given to the stock market crash that happened in 1929. Black Thursday was caused by the stock market crash and the aftermath of the crash. It was one of the most catastrophic events in US history, and it led to the Great Depression.
FAQs
What were the causes of the stock market crashes of 1837, 1869, and 1873?
The causes of the 1837 stock market crash were: – false signals (caused by high frequency trading) – manipulation of the markets – inefficient market regulation.
What was the impact of the stock market crashes of 1837, 1869, and 1873?
The impact of the stock market crashes of 1837, 1869, and 1873 was devastating. Black Thursday is the name given to the day in September 1869 when the stock market crashed for the first time. The crash of 1873 followed soon afterward and marked a turning point in American capitalism.
The crash of 1837 had been an ominous sign, but with Black Thursday, the public was now fully aware of the growing danger of a market crash. Before this time, traders used margin to buy stocks rather than investing their own money.
For example, if someone wanted to buy shares in a company, they would need to borrow money from a bank or other lender. These loans were secured against the collater were at their lowest.
The Dow Jones Industrial Average fell approximately 50% from its peak on October 22, 1966 to its low on May 6, 1869 In addition to losing their investments, traders of the day were also threatened with financial ruin if they were unable to pay back their debts.
This is why so many people, including President Ulysses Grant tried to sell their stocks at any cost. This caused prices to plummet even further making it more difficult for everyone who was trying to sell their stocks to buy back in later at a lower price.
What was the difference between the stock market crashes of 1837, 1869, and 1873?
The 1837 Stock Market Crash: The 1837 stock market crash was the first of a series of events which would lead to the Panic of 1873.
The crash began on May 8, 1837, when the London Stock Exchange shut down for two days due to panic selling. Traders had been very optimistic about the future value of stocks and were now demanding full price for their holdings, causing a stock market ‘crash’.
This crisis would last until May 21, when trading resumed after an agreement was reached between brokers and investors.
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