We Learn by Studying the Past

The crash of 1929 cut the total value of the New York Stock Exchange by 12.8% and it was followed by what we refer to as the “Great Depression.” Yet the much larger drop of 1987 produced barely a ripple in time. The Dow Jones Average actually finished higher at the end of 1987 than it had started and had recouped its losses within two years. There was no “Second Great Depression.”

To be sure, the 1987 crash took its toll on people and their finances. But, it could have been a lot worse.

Why wasn’t it? The 1987 crash had less severe consequences because major financial organizations had made plans for how to deal with a similar disaster if it occurred. When the Stock Market collapsed, the Federal Reserve Bank and related organizations, took steps immediately to lessen its effects. Their plan was put into action.