there is a saying…
When America sneezes, everywhere catches a cold. That is, when America sneezes, everywhere catches a cold…
This Friday, there was a sharp fall in the Indian stock market, investors lost Rs 5 lakh crore in one go, it was said that the US job data is indicating a recession and its effect is visible on the Indian stock market, before this, last month i.e. in the first week of August, when the figures of increased unemployment rate came in America, the whole world was shocked. There was a stir in the American stock market, that phase of decline reached the Indian markets via America-Japan-Korea. It was said that the world’s strongest economy is heading towards recession. All the stock markets of the world including India started crashing. People started selling shares in a hurry and lakhs of crores of rupees of investors were lost in one or two sessions.
In this environment, people started fearing the Great Depression of 1929. They remembered that Black Tuesday, which caused havoc in the whole world. We will tell you what exactly happened on that Tuesday 95 years ago, the mere sound of which created a stir, about which even today the leading businessmen and economic analysts of the world keep warning about the stock market.
The feel good before the bad taste…
If most of us are asked where in the world we can go to live a life of fun, luxury and prosperity, then the American Dream will immediately flash in everyone’s mind. This story of the wealth of America i.e. Uncle Sam of the world is not new.
About a century ago, in the autumn of 1928, the future President of America, Herbert Hoover, declared, “Today we are very close to the final victory over poverty for the first time in the history of America.” Most American citizens agreed with him. People had never lived a better life than this before. The unemployment rate was only 4 percent, which means that 96 out of every 100 people had a source of income.
Jazz music was in vogue, radios were selling in large numbers, electricity and telephone lines were being laid rapidly. People were living comfortably. Shopping was available on credit, cars had become so cheap that the middle class could easily buy them. Houses and plots were being sold rapidly in cities like Florida. People were travelling a lot. Everyone was eager to invest in shares. Even those who did not have money were taking loans from banks and doubling and tripling their money in the flowing Ganga of the share market. Everything was going on in a good way.
Then the Great Depression knocked painfully…
But exactly one year later, financial panic took over. The New York stock market crashed, businesses closed, banks collapsed, millionaires were ruined and ordinary citizens lost their entire life savings. People lost their jobs and homes. In the next few years, one in every four Americans was unemployed. Then this economic crisis spread beyond America to the whole world. This was the biggest tragedy of the modern world, which we know as the Great Depression.
The day of 29 October 1929 is known in history as ‘Black Tuesday’. This was the day when the US stock market crashed and with this a severe recession began in economies around the world. How did that day come?
From Black Thursday to Black Tuesday…
Imagine, it is a bright morning in New York City, USA. People are busy in their offices and work, everything is going on normally. There is a stir in the stock market. Investors, who were already expecting a boom in the market, are now preparing to sell their shares. But everything is going to change very fast.
Actually this bad story started a week ago i.e. on 24 October i.e. Thursday, but then someone noticed it.
No one had imagined that the depth of this crisis was so much. That day the price of shares kept falling but by afternoon some businessmen took the responsibility of handling it. They bought shares in large numbers and shouted to the market that there is no crisis, don’t be afraid. Prices started rising again and people started breathing a sigh of relief. But this was the calm before the storm. Black Monday knocked again on 28 October. The trend of decline was seen again but the market ignored it too. Then came the morning of 29 October i.e. Tuesday which the world could not forget.
What exactly happened that day?
On this day, about 1.6 crore shares were bought and sold on the New York Stock Exchange, but the sharp fall spoiled all the fun. There was a simultaneous fall of 11.73%. It was such a scene that investors just kept watching their money being lost. Nothing was heard on Wall Street except ‘sell-sell’. Millions of dollars vanished into nothingness.
The market was in shambles. A woman committed suicide by jumping from the 44th floor of a building in Manhattan. Actor Groucho Marx lost everything. In the next two years, two thousand banks went bankrupt and people’s money also became zero with those banks. There was fear everywhere, investors were robbed and the market of rumours was so hot that on seeing a person climbing a tall building to paint, people ran thinking that an investor has climbed up to commit suicide.
Panicked people rushed to the banks to withdraw their money. But they were also locked, the banks themselves were not in a position to return people’s money. Firstly, people who had taken loans and invested in shares were not in a position to return, secondly, the banks themselves had invested people’s money in shares whose value had now become zero.
Those whose savings were lost were already in trouble but those who had taken loans and invested in the stock market were in double trouble, their money was lost but the banks had to repay the loans. Caught in this crisis, in the next 4 years, about 11 thousand banks of America i.e. half of the banks were closed. People started fearing to use even those banks which were not closed.
Industries came to a standstill, banks started going bankrupt. After the market crash, people felt as if they were living in a fantasy world, there were factories but no one was there to buy their products, people started losing their jobs. Farmers’ crops were ready but there was no one to buy them. There was devastation everywhere. People did not have money to eat food. Long queues started forming for bread at centers providing free food. At least 82 thousand meals were being given free of cost in New York City in a day. People became homeless and came on the streets.
What effect did the Great Depression have on the world?
American companies had influence everywhere in the world. When the banks in America collapsed, the banks in Europe also started collapsing one by one. The effect of economic recession was seen all over the world. Industries started shutting down in Europe, Asia and other continents. People’s income decreased. And the unemployment rate reached 33% in many countries. Due to this recession, there was a massive decline of 45% in global industrial production during 1929 to 1932 and for the next decade many countries of the world had to struggle with the crisis of goods supply.
President Hoover opened ‘Hoover Ville’ for the homeless Americans, which became a butt of jokes. Economists wanted the government to take strict measures to handle the situation, but nothing happened. Although 5000 people got employment in the dam construction project, these steps proved insufficient to deal with a big crisis like the Great Depression.
By which measures did the fear end?
On the other hand, New York Governor Roosevelt came up with a model to deal with this situation. He believed that the government should be ready to help every person who needs help, because before losing their jobs, those people have already contributed to the development of the country. He came up with the TERA program, under which it was to be ensured that the unemployed person has enough money to survive, apart from this he made efforts to create employment.
Roosevelt said that he wanted to implement this program in the entire country. He announced to contest the presidential election. He contested the election and America, which was facing recession, elected him as the President. After becoming the President on 4 March 1933, Roosevelt formed a group of advisors named ‘Brain Trust’ which made a new strategy to get America out of the crisis and for development. Prohibition of liquor was abolished so that the government’s income from taxes on it could increase. Under the TERA program, it was decided to use the rotting crops in the fields to feed the people. For the first time, lunch was arranged in schools so that children do not remain hungry and the burden on families is reduced.
Roosevelt’s government took the stock market under government control and made strict rules to monitor trading. Joseph Kennedy was made the chairman of the Stock Exchange Commission. To end the banking crisis, only those banks were allowed to operate whose fundamentals were strong and were in a position to operate in a stable manner. To provide employment to the working class, the CWA program was started under which construction of roads, parks, schools, bridges, and outhouses was done across the country. This provided employment to more than 4 million workers.
Every coin has two sides…
Finally, in 1941, when Japan attacked the American Pearl Harbor base, America had to enter the war. For the war, work started happening rapidly in American factories and a large number of people were also needed on the war front. In this way, with America’s entry into the Second World War, the problems of employment and industries started getting resolved automatically.
By the time the Second World War ended in 1945, America had emerged out of the grip of recession and become the richest country in the world. Even today, after 9 decades, America is the world’s business leader and every change in its policies continues to impact the world. Even a negative signal from the US Federal Reserve shakes the stock markets of the entire world and a positive signal brings a big jump.
When did the world face economic recession?
#The Great Depression of 1929- This economic recession started in America and its impact was felt globally. The collapse of the stock market, unemployment and decline in industrial production were its main symptoms. This recession lasted till 1939.
#1973 Oil Crisis- This recession was caused by the increase in oil prices by OPEC, the organization of oil exporting countries. As a result, many developed countries faced economic crisis and high inflation.
#2002 recession- This recession came after the dot-com bubble burst in America and the 9/11 attacks of 2001 and lasted for many years
It continued to trouble the world. Companies of many countries were ruined in this. During this period, unemployment increased in many countries and economic activities declined. The stock market also witnessed a huge decline. The NASDAQ index suffered a loss of about 80% from 2000 to 2002.
#2008 recession- This recession started with a crisis in the housing sector in America and affected the whole world. Banks of many countries were ruined. During this period, economic growth declined in many countries and unemployment increased.
#CoronaLockdown – The lockdown imposed due to the COVID-19 pandemic that began in late 2019 severely impacted the global economy. During this period, global GDP declined by 3%, which was more than in previous crises.
What is the economic policy of Trump and Kamala Harris?
This time in the 2024 presidential election, there is a lot of discussion about the difference in economic policies between Donald Trump and Kamala Harris. While Republican Trump is in favor of giving priority to American companies, waging a trade war with China and promoting the global business of American oil and gas companies, Democrat Kamala Harris is in favor of giving priority to the middle class and the working class. Kamala Harris is also in favor of increasing corporate rates and imposing more taxes on the rich.
Why are fear waves coming from Uncle Sam again?
On one hand, elections are near in America and on the other hand, there is talk of recession. The discussion of recession in Uncle Sam i.e. America, which leads the world, is being done again after the recent unemployment and GDP figures. According to the recently released data, the unemployment rate in America has reached 4.3%, which is the highest level since October 2021.
This is the third consecutive month when the unemployment rate has increased in the world’s richest country, America. On an average, 2.15 lakh jobs are created every month in America, compared to which only 1.14 lakh jobs have been created. The second indication is that in the April-June 2024 quarter, the US GDP grew at a rate of 2.8%, which is a low level. The inflation rate is above 6 percent. Looking at all these factors, experts have started discussing the US recession.
Its direct impact was seen on the Wall Street stock market. Due to the impact of these figures in the first week of August, indexes like NASDAQ, S&P 500 and Dow Jones witnessed a huge decline. Its impact was also seen on the Indian markets. Recently, Harry Dont, a famous American economist whose predictions about the market and economy have proved correct in the past, had warned investors that a bubble has been forming in the market for 14 years and next year i.e. in 2025, there may be a recession bigger than 2008.
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