Stock Market Crash
- Submitted by: djibril
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- Category: Politics: Economics
- Date Submitted: 05/23/2011 02:08 PM
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STOCK MARKET CRASH
Does anybody remember the Wall Street crash in 1929? When the stock market crashes, a significant loss of paper wealth occurs. The stock market crash affects the economy. There are three effects when the stock market crashes.
One effect of a stock market crash us many banks fail and some cease to exist. For example in the 2008 economy crisis, 22 banks collapsed in America. For this reason people suffer of low economy and lose trust in financial institution. People start to keep possession of their own money within their houses instead of going to the bank.
The second effect of a stock market crash is unemployment. Most companies look for ways to reduce expenses and the salary/wage bill. Companies reduce a number of workers, therefore causing a rise in the rate of unemployment. This can be recalled in the 2008 economic crisis, when General Motors planned to eliminate 30,000 hourly jobs. That had devastating consequences for cities in the United States.
Another effect of a stock market crash is the increase of several global problems due to the financial crisis. This was worse in Iceland as economic difficulties became evident in the autumn of 2008 as conditions tightened in the global credit market. Icelandic banks owed around six times the country's total Gross Domestic Product (GDP) and when the world's credit markets dried up, they were left unable to refinance loans as a result Iceland’s government almost went to bankruptcy.
To summaries, a stock market crash has three effects. The first one being banks collapsing, second being unemployment and the last one about global financial problems.
Does anybody remember the Wall Street crash in 1929? When the stock market crashes, a significant loss of paper wealth occurs. The stock market crash affects the economy. There are three effects when the stock market crashes.
One effect of a stock market crash us many banks fail and some cease to exist. For example in the 2008 economy crisis, 22 banks collapsed in America. For this reason people suffer of low economy and lose trust in financial institution. People start to keep possession of their own money within their houses instead of going to the bank.
The second effect of a stock market crash is unemployment. Most companies look for ways to reduce expenses and the salary/wage bill. Companies reduce a number of workers, therefore causing a rise in the rate of unemployment. This can be recalled in the 2008 economic crisis, when General Motors planned to eliminate 30,000 hourly jobs. That had devastating consequences for cities in the United States.
Another effect of a stock market crash is the increase of several global problems due to the financial crisis. This was worse in Iceland as economic difficulties became evident in the autumn of 2008 as conditions tightened in the global credit market. Icelandic banks owed around six times the country's total Gross Domestic Product (GDP) and when the world's credit markets dried up, they were left unable to refinance loans as a result Iceland’s government almost went to bankruptcy.
To summaries, a stock market crash has three effects. The first one being banks collapsing, second being unemployment and the last one about global financial problems.