30 times history has tanked the stock market
The stock market is a volatile system not for the faint of heart. Even with extensive, independent research, informed financial consultants, and gobs of dumb luck, jumping in with the bulls and bears is a move that's riddled with risks standing well outside of anyone's control.
Throughout history, major events—including the Civil War, Pearl Harbor attack, and dot-com bubble burst—have been responsible for dropping the NASDAQ and Dow indexes and causing runs on the banks. Stacker has rounded up 30 such instances of history tanking the stock market, reminding everyone that what goes up, must come down. The slideshow is chock-full of stats and numbers that will tickle the fancy of investing aficionados and educate the market. So hold onto your hats (and stocks), and prepare for a walk down Wall Street memory lane.
1772: The Credit Crisis
The Credit Crisis of 1772 had origins in Europe, but it didn’t take long for the effects to be felt in America. British creditors had allowed southern colonies to flourish; but when merchant holders ran into economic hardships overseas, they urgently demanded debt repayment. Colonials did not have enough liquid assets to pay them back. This left the south in a crippling position and the American economy in a tailspin.
1792: The Panic of 1792
Not long after the First Bank of the United States was formed by Alexander Hamilton, Americans experienced their first official stock market crash. The bank had been overextending credit to citizens for two years, and a sudden tightening of the reins—combined with major loan defaulting by speculators William Duer and Alexander Macomb—caused a run on the banks. It took some slick maneuvering by Hamilton and dozens of other banks extending credit to the First Bank of the United States to stabilize the market.
1819: The Panic of 1819
The War of 1812 created huge levels of economic expansion in the country; but when the fighting ended, so did the growth. Some banks failed, others called in loans that land speculators couldn’t repay, many mortgages were foreclosed, and unemployment rose. In the end, these factors and new conservative credit policies caused a stock market crash that the economy wouldn't fully recover from until 1823.
1837: The Panic of 1837
A real estate bubble and erratic U.S. banking policies ushered in the Panic of 1837, followed by a six-year depression felt around the world. Speculation holdings on Northeast forests that were grossly overvalued caused banks to fail; while the value of paper money decreased when President Andrew Jackson mandated government land must be paid for in silver or gold, essentially bringing commerce to a standstill. Eventually, shifting investments to American railroads ended up reigniting the economy.
1869: The Gold Con
Jay Gould and Jim Fisk, two financiers with reputations as cheats, had a get-rich-quick scheme that involved buying up all the gold they could and selling it all off at a major profit. The plan relied on gold's value skyrocketing—only possible if the U.S. government held onto its gold as well. But when Ulysses S. Grant became president, he sought to put more gold into the market by using it to purchase greenbacks (paper money) from the public and replace them with gold-backed bills. When he realized the plot to drive prices, Grant retaliated by ordering the sale of $4 million in government gold. The flooding of the markets and subsequent crash in gold value caused the U.S. gold market to collapse on Sept. 24, 1869, also known as Black Friday.
1873: The Panic of 1873
Following the Civil War, European investors began selling off investments they had made in U.S. railroad companies. Soon, there were more railroad bonds available than anyone wanted or could buy up and many railroads went bankrupt. When Jay Cooke & Company, one of the biggest banks in America at the time, also went under, citizens feared for their own money and attempted to withdraw as much as possible.
1901: The Panic of 1901
The first stock market crash of the New York Stock Exchange, known as The Panic of 1901, was primarily caused by the fight for control over the Northern Pacific Railroad. As businessmen E.H. Harriman and James J. Hill battled for the company, stocks in dozens of other rail companies began to drop, eventually drowning the market and causing everyone to sell. As a result, the Northern Securities Company was formed and many small investors were never able to recover.
1907: The Knickerbocker Crisis
As far as financial crises of the 20th century go, the Knickerbocker Crisis was second only to the Great Depression. The six-week event was sparked by a failed attempt to corner the copper market, which initiated runs on banks and trusts associated with the industry. A run on the Knickerbocker Trust left the company bankrupt and caused even more panic. Only pledges of large sums of money from private financiers like J.P. Morgan shored up the banking system and returned the market to normal.
1926: Florida's real estate craze
A large migration to Florida in the 1920s increased the Sunshine State’s population; but the housing market couldn’t meet the demand, and property values swelled. The bubble burst and values shot down the same year as a massive hurricane, plummeting the stock market plummeted and establishing a precursor to the Great Depression.
1929: Black Tuesday
The 1920s stock market experienced a period of rapid expansion based on speculation. But by August 1929, production had declined, unemployment increased, and many stocks were revealed to be overvalued. The fall began on Oct. 18 and peaked Oct. 29, or "Black Tuesday,” when 16 million shares were sold on the stock exchange and billions of dollars lost in a single day. By 1932, stocks were only worth 20% of what they had been in the summer of 1929.