The stock market crash of 1929 seemed to have been caused by a collapse of stock market prices in the US. It quickly spread to other countries. A significant aspect of the crash was the panic that had people franticly trying to sell off stock. This caused the ticker tape system to be overloaded and stop working and then when people switched to using the phone to sell off stock the phone lines became overloaded and this lack of communication exacerbated the panic. Many people who didn’t trade stocks ended up losing all of their savings because of the run on the banks when people influenced by fear all tried to withdraw their money at the same time which forced banks to close since they didn’t have enough money on hand to pay out every depositors money. This led to establishment of the FDIC, Federal Deposit Insurance Corporation, in 1933 which provides protection to bank consumers among other provisions.
The market crash of 2008 was significantly more minor than the one that led to the Great Depression. The numbers didn’t fall as far. The collapse of the US housing bubble seems to be what kicked off the crash this time. Banks got freer with the home loan money which led to housing prices getting artificially inflated and more people getting stuck in loans that they couldn’t afford to pay. As interest rates rose housing pricing started declining which left many people stuck in houses that were valued at much less than the amount of money they owed on them. During the housing boom mortgage backed securities and collateralized debt obligations increased and investors around the world had invested in the US housing market. When the housing prices began to fall foreclosures started to increase and the financial strength of the banks started dropping. Defaults on other types of loans also increased.
From the middle class point of view the most significant difference between the 1929 crash and the 2008 crash is that there was no run on the banks. Even though some banks failed the FDIC was in effect so the average person didn’t feel that they were in danger of losing their savings.
Both of these crashes followed periods of intense technological development and inflation. The 1929 crash was followed in the early 1930’s by a gradual economic improvement and then a significant improvement with the start of World War II. Supposedly, we are currently in a stage of gradual improvement. Hopefully, significant improvement this time won’t require another world war.
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