Informing Yourself About The 2008 Stock Market Crash
It happened so fast. It seems like one day the stock market was healthy and then the next day it was tumbling down on itself.
During the stock market crash of 2008, the market fell to an incredibly low level, scores of big businesses went bankrupt or altogether disintegrated, and the American public was left as the victim. It seemed like it came out of nowhere.
The effects were violent and are still being felt today. The housing market plummeted, unemployment rates rose, and now for some finding a steady job is like trying to find a needle in a haystack.
Millions of Americans have suffered from the effects of the crash. Many are left wondering why. Despite what some might think, the crash was not a sudden thing. Many problems arose in the American financial system and eventually contributed to its downfall.
These problems started popping up years before the crisis even took place. The first sign could be seen in the mortgage industry.
In the years preceding the big fall, lenders got too cocky. The industry was thriving and they were giving out loans like candy.
What was worse was that they were giving out these loans to families or individuals with poor credit. Most of these people would never be able to pay back the loans that were given to them.
Nevertheless, the industry kept giving them out until they realized the risk that this entailed. This realization also spread to the national financial system, consisting of big investment businesses like Bear Stearns.
Bear Stearns was one of the first to fall in the economic crisis of 2008. Because of the problems elsewhere, those who invested into Bear Stearns began to feel unsafe with their money being in that company.
They felt as if their money wouldn't be repaid. As a result, investors kept pulling out of their deals until the company finally had to file for bankruptcy because of all the capital that it had lost.
Other institutions began to fall like dominos just as Bear Stearns had. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) had over $6 trillion of mortgage loans piled up.
They began to be bogged down by financial stress until finally the government had to bail them out, which only raised the national debt higher and higher. Other companies that had to be bought or bailed out by the government in that same amount of time included Merrill Lynch, Lehman Brothers, and the American International Group (AIG).
In October 2008, the stock market finally gave way and crashed. The week of October 6th was where the most damage was done and some call this the "Black Week".
In this period and others throughout the next couple months, it would reach the lowest levels that it had seen in 5 years. Because of the nature of the market, it would keep declining to lower levels.
The United States wasn't the only one to feel the pain of the crash. Many other countries felt the effects because of the intertwining of their economies with the American economy.
Stocks lost their value all over the world. In Europe, many banks failed and even Iceland was on the brink of declaring bankruptcy on behalf of the whole country.
The crash also had a dismal effect in Indonesian and Chinese markets. The United States was not the only victim in this historical event!
It is now two years later, and while many of the previous economic problems have been solved, there is still much that the nation has to deal with. These problems have trickled down to the point where they are hindering the American public and their bank accounts.
The housing market is still volatile, with many families having to foreclose their homes and go back to renting apartments or making less risky housing decisions. Unemployment rates are still at record levels, which means that it is much harder to find a job because thousands of people could apply for one job that is open.
So what should we learn from the crash of 2008? If you should get anything out of this tragedy, it is to be smarter with your money so that you make wise decisions instead of foolish ones.
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