Whether they're called credit crunches, panics, or financial crises, large negative moves in financial markets have been occurring since free-market trading began. In the markets, emotion sometimes overcomes reason and rational decision-making gives way to greed or fear. Excessive greed leads to bubbles and sows the seeds for future panic. As the history of the financial markets has shown, panic in the markets can often lead to a crash. Let's take a look at some of the most notorious market bubbles and crashes around the world.
Early Market Crashes
Perhaps the most famous example of an early market bubble is the Dutch tulip craze of the 1630s. Tulips had been introduced into the country 30 years earlier, and were widely sought after for their beauty as well as the scarcity of certain unique color patterns. As more and more speculators began crowding into the market, prices rose and a market bubble built to the point that some rare tulip bulbs were worth as much as a house on a canal. As some speculators began selling their tulips, prices fell, and as more tulip owners rushed to lock in their profits, a downward spiral occurred. In short order, tulips were once again priced similarly to other plants or vegetables, but the sharp decline resulted in large losses for many people and caused an economic depression.
In the early 1700s,
In 1907, the
Stock Market Crash of 1929
Perhaps the most well-known market crash occurred in 1929 in the
Economists debate how much of an influence the market crash had on the ensuing economic slowdown, but October 29, 1929, is commonly cited as a starting point for what would become the worst global depression of the twentieth century. (For more, see The Crash Of 1929 - Could It Happen Again?)
In the 1980s, bubbles and crashes began to occur with greater frequency. As oil prices soared in the 1970s, oil exporting nations deposited their newfound wealth in international banks, which turned around and lent the money to rapidly developing Latin American countries. When interest rates rose in the early 1980s, investors began to suspect that the Latin American countries would have difficulty repaying their debts. These fears were confirmed in 1982 when
The 1980s also saw the savings and loan (S&L) crisis in the
The 1980s witnessed two of the greatest bull markets of the century in
The 1990s also saw a number of market crashes. In 1994,
A more severe emerging market crisis unfolded in 1997 after
The late 1990s and early 2000s also saw another debt crisis in Latin America when
Much of the money that left the stock market after the Nasdaq crash eventually found its way into the real estate market, prompting the speculative housing bubble in the