100 Years of Market Crashes: How Screwed are We?
From 1929 to 2025, Market Crashes have been a fact of Western Capitalism for 100 years- so what does the Past tell us about Today? And what can we do to avoid baking depression era water pie tomorrow?
2025, Wednesday the 2nd of April: President Donald J. Trump announces global blanket tariffs at a minimum of 10%, up to 104% - because round numbers are for the economically literate. The S&P 500 collapses 4.5% immediately. The Dow drops 3%. By the end of the week the American economy will have had $6 Trillion in market cap wiped out. But hey, nothing says "America First" quite like "Americans' 401K's Last."
1929, Thursday the 24th of October: This will be remembered as Black Thursday. Following an already worrying drop of 4.5% the previous evening, the NYSE would see it's first ever significant market crash. 11% of the market value was wiped out upon market open. A decade, known as the Roaring Twenties, had been operating on the assumption that the stock market only goes up - the original "stonks" mentality - rampant speculation would have no consequences. It was this, that many historians highlight as the foundation of the collapse.
Little discussed was the impact of the previous few days in the US Senate where apparently, the finest minds go to die. Initial Senate votes were held on the Smoot-Hawley Tariff Act, a brilliant piece of protectionist legislation. Nobody had seriously contemplated such protectionists policies since the 1890s, presumably because someone back then had actually read an economics textbook. Of course, the Washington experts confidently predicted its inevitable demise. Then, on October 23rd—just hours before Black Thursday would kick off Wall Street's meltdown—an amendment mysteriously passed with support from several senators who had previously opposed it.
Apparently, nothing inspires market panic quite like Congress suddenly changing its mind about trade policy. This legislative flip-flop helped trigger the market volatility that plunged America into the 12-year economic nightmare known as the Great Depression . Who says politicians can't get things done when there's an economy to ruin?
If we can learn anything from the Great Depression, it is that the Smoot-Hawley Act, passed into law swiftly at its start, exacerbated rather than alleviated the disaster. The tariffs instituted following the market crash crushed American exports, and led to conditions that saw wasteful agricultural overgrowth resulting in the Great Dust Bowl of the 1930s.
Lesson One - for a market crash: Tariffs introduce volatility, but even worse, they exacerbate the nation's ability to escape resulting depressions.
1987, Monday the 19th of October: This will be remembered as Black Monday. Mostly because economists aren't very creative; they are geeks. The US was 7 years into Reaganomics - the economic theory that money trickles down, much like water in the Sahara. It was 10 years removed from the New Deal Coalition: the solution to the Great Depression that had provided it 50 years of relief from crash-related economic depressions. The Markets had been beyond celebratory. They had been soaring since 1983, contributing to the wipeout victory of the existing US government in 1984 - no one wanted to fix what wasn't broken, especially if it was filling their pockets.
Then it all broke. The crash was the greatest the US had ever seen. Worse than even 1929. The Dow collapsed 22%, the greatest ever single day fall. The desperation to sell overwhelmed the NYSE's yet untested mechanical and computerised systems. Throughout the day there were 195 trading halts or delays. Some orders to sell took more than an hour to process, feeling more like an average day at a British train station.
The government couldn't allow this to happen again (the stock market crash, not the train thing) - so they came up with a solution, a new one, no tariffs, no sweeping social programs and Keynsian Economics, they rigged the system. Lose 7% of value in a day? You're not allowed to, go sit down for 15 minutes. Still won't stop falling? Hit 13% and you put the market in the corner for another 15 minutes. Market's still not behaving, loses 20% of value in a day? Actually that's illegal now, all trading will stop for the rest of the day. Capitalism's invisible hand apparently needs a time-out occasionally.
Lesson Two: Selling Stocks is unpatriotic - so make it illegal to do so if people see 20% of losses in a single day. Maybe they should do the same with selling your Tesla! Nothing says "free market" quite like "actually, you're not free to sell right now."
2000, Monday the 3rd of April: Dot Com Companies were all the rage. The Market just could not get enough of these new companies like Amazon, eBay, Yahoo, Beenz. They didn't seem to slow down, and they didn't seem capable of losing. They were nevertheless very capable of losing money. This new boom market was ripe for consolidation. Dot Coms were merging like it was mating season, and nothing was going to stop them - certainly not profitability requirements.
Aha! Antitrust was going to stop them. Referring to the Sherman Act a federal judge declared Microsoft a monopoly, and it instantly lost 15% of its value. The Nasdaq, the fancy new fund tracking the Dot Coms, collapsed 8%. A week later the Nasdaq was down 25%. The collapse continued for 2 and a half years. By the end the NYSE had lost $5 Trillion in value. The Nasdaq had been wiped out by 78%.
In the years since the trough of the Dot Com collapse stabilisation has been ensured through the allowance of consolidation. Now Microsoft, Apple, Amazon, Meta can all be monopolies, and judges have gone from ruling companies in violation of the Sherman antitrust act to insisting "Success is not illegal". Problem Solved.
Founder Mode Versus Manager Mode: The Power of Wearing the Badge
In the brutal coliseum of business, there are two distinct species of leaders: those who wear the badge and those who wear the suit. The badge-wearers? They're in Founder Mode. The suit-wearers? Manager Mode. And yes, the difference matters more than your quarterly bonus.
Lesson Three: Monopoly is no longer a board game, it's an aspiration - and we've all agreed to call it "market efficiency" instead.
2008, Monday, the 15th of September: It had been nearly a year of tumult and uncertainty in the US economy, as the issue of Subprime loans seemed to just grow and grow and grow- like a cancer that Wall Street insisted was just a "healthy growth opportunity". It had never been this bad though. Lehman Brothers, one of America's premier financial institutions, declared bankruptcy. Merrill Lynch was purchased by Bank of America to avoid the same fate.
The Dow collapsed 4.5%, it had already dropped 20% from it's peak the previous year. In a month the Dow would see a further drop of 18% in just a week. The S&P fell 20% in that same time frame. A year later the market would bottom out 56% lower than it's peak in 2007. The global economy would experience the Great Recession until early 2010. Recovery was ongoing until 2013.
The solution was unique. Markets spent months bottoming out as it became more and more likely that that the US government would nationalise the banks. This sort of economic gunpoint was successful. Rather than following through on this the American government gave out the biggest bailout in history to the Wall Street Banks that were Too Big To Fail . They were horrified to learn that Banks used this to give out millions in bonuses, that they then tried and failed to yank back from them. In the 17 years since it has become the first ever instance in American history that a financial crash failed to result in a redistribution of wealth from rich to poor, flowing the opposite way instead.
Lesson Four: Socialism for the rich, rugged individualism for the poor - the American Way 2.0.
Today: Markets continue to bleed. President Donald J. Trump is taking his trade policy from Peter Navarro, or is that Ron Vara? A rally briefly looked possible on Monday afternoon when a misunderstanding left the markets confused and soaring up 3% on it's previous losses - demonstrating that sometimes the best thing a government can do for the market is to be briefly misunderstood.
The confusion only lasted a little while after the government insisted it would be pursuing tariffs to the death. The market quickly contracted. Monday's rally was further killed by the administration making it's 104% updated tariffs on China official, and the Dow is now down 12% on the year, the S&P down 15%, the Nasdaq down 20%. The US's solution? Tariffs, Tax cuts, and advertising purchasing of stock at a depressed level as a patriotic act. It's good to see we're learning. Nothing says "I've studied economic history" quite like "let's try Smoot-Hawley again, but with MORE ZEROS!"
And still, the administration is celebrating it's removal of $7 Trillion in stock market value as doing just what the radical leftists have wanted and challenging the American oligarchy: because clearly socialists have always called for the destruction of wealth, not it's redistribution. Let populism shine, and if not, it should just keep breaking eggs - and a few 401k's. Soon we'll all be equal - equally poorer - except for those who somehow always manage to get richer in a crisis. Funny how that works.
If history has taught us anything, it's that we've learned absolutely nothing. Tariffs didn't work in 1929, but they'll definitely work in 2025 because... reasons. Trading halts didn't prevent the 2008 crash, but they're still our first line of defense. Monopolies were bad until they became our tech darlings. And bailouts? They're only socialism when they help ordinary people.
So get ready to dust off grandma's recipe for water pie. At least this time around, we'll have TikTok videos to show us how to make it properly.
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