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IN THE BEGINNING
It all started under a buttonwood tree, right, at the foot of Wall Street in 1792, where the Bill of Rights was passed and President Washington was inaugurated. Traders and speculators signed the Buttonwood Agreement under that tree, a pact that created the structure for the New York Stock Exchange. The NYSE was formally established in 1817. Read more about the origins of Wall Street in Wall Street in History by Martha J. Lamb.
PANICKING IN THE 1800's
Panic of 1819—Taking place during the politically calm Era of Good Feelings, the Panic of 1819 was America's first major financial shock. There had been turmoil in the markets in 1797 and 1812, but those panics were mostly the result of factors outside the United States. The Panic of 1819 was mostly homegrown. Possible precipitating factors include the collapse of the cotton economy in the South, the contraction of the Second Bank of the U.S., and a cyclical boom-bust reaction triggered in part by borrowing for the War of 1812, though there is some disagreement among economists. The Panic lasted until 1823. It included a wave of bank runs and subsequent failures, foreclosures, wide-scale unemployment, and overall economic contraction.
Panics of 1837 and 1893—The Panic of 1837 was the country's first economic depression. Runaway speculation leading to inflation, a poor wheat crop and the failure of the British economy were major factors in the Panic. President Andrew Jackson tried to battle the inflation by requiring banks to only accept payment in gold or silver. This led to deflation. The crisis led to widespread bank failures and unemployment. The Panic of 1893 was the next great crisis, brought on by railroad overbuilding (a "bubble") and a run on the gold supply. Industrial cities and mill towns were hit the hardest, as export prices for wheat and cotton plummeted. Read more about the Panics of the 1800's in A Brief History of Panics in the United States by Clement Juglar (translated by DeCourcy V. Thom).
GREAT DEPRESSION/STOCK MARKET CRASH OF 1929
After a six-year run during which the Dow Jones Industrial Average increased five-fold, the market crashed on Nov. 24, 1929—known as Black Friday. The crash ushered in the Great Depression, a time when the unemployment rate among working people skyrocketed to more than 25 percent. Before the crash, many Americans began to believe that the stock market would continue to rise indefinitely. Faith in the U.S. economy was shaken around the world. The exact causes of the crash and subsequent Depression are still the subject of debate by economists and political figures. In A Bubble that Broke the World, libertarian author and journalist Garet Garrett theorizes that the root cause of America's financial troubles since World War I was massive amounts of lending to a staggering Europe, made possible by flexible currency policies instituted by the Federal Reserve after World War I. Another likely cause of the crash is runaway speculation by irrational investors who believed the stock market would rise indefinitely. Ten Years of Wall Street (1919-1929) shines a harsh light on these boom years for the American economy.
The Pecora Investigation—The Pecora Investigation into the causes of the stock market crash of 1929 exposed widespread abusive practices on the part of many U.S. banks and their affiliates, including the underwriting of shaky securities to pay off bad loans, propping up their own stocks through "pool operations," and conflict of interest. The inquiry was named after Ferdinand Pecora, its fourth and final chief counsel.
The Crash of 1987 did not have as much of a lasting effect as the downturn in 1929. But the speed and scope of the crash worldwide was unprecedented, with world markets falling 23 percent in one day. It took two years for the U.S. market to return to its robust gains of the mid-1980's. Potential causes for the worldwide crash, which started in Hong Kong and carried through to the European and U.S. markets, include lack of liquidity, overvaluation, and the wholesale selling of portfolio insurance derivatives by traders using automated computer programs and almost removing human impulse from the trading equation. Tidal Swings of the Stock Market provides a look at the causes and effects of some of the earlier roller-coaster days in Wall Street's history, and may give some insight into future swings.
The global economy took a nosedive in 2008, largely due to a large-scale decline in real estate values, runaway inflation, and an expansion in commodities prices. While the specific causes of the downturn are still a subject of heated debate, the effects have been long-lasting. The economic contraction is on pace to be the largest since the Great Depression in the U.S., with unemployment levels rising and GDP falling. Journalist Danny Schechter was one of the first to connect Wall Street to the disastrous subprime mortgage loans that were a major factor in the downturn. Schechter details this connection in Plunder, from Cosimo.
Wall Street in 1798, left, and 1850
NYSE floor in 1908, left, and 2007
Wall Street in 1912, left, and in 1929 shortly after the market crashed
23 Wall Street in 1914 and in 2007
Images from Wikimedia Commons
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