What Happens When the Stock Market Crashes?

Economics can be confusing, and as we watch the stock market go up and down, we may feel stressed by it. Luckily, many of us have not experienced a stock market crash in our lifetime. It’s an unfortunate occurrence that places like Columbia Bank Woodbridge try to keep people safe from. We’ve all heard about the stock market crash in 1929, but do we really understand what happened?

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What made it happen? The stock market crash in 1929 occurred because of panic. Essentially, people totally freaked out because what had been a successful “bull” market started to decrease. Many people started dumping shares. The rapid selling quickly decreased the value of many stocks, thus causing the Dow Jones to drop 50% in one day.

Now, one thing that most people don’t realize is that stock market crashes don’t just happen for absolutely no good reason. Usually a combination of irresponsible stock ownership, an already unsteady economy, and years of companies just barely getting by increases the potential for one of these events to occur.

What happened to companies and investors? Companies had to scramble to try and recover quickly. Needless to say, that didn’t happen as quickly as people would have liked. Investors lost literally hundreds and thousands of dollars. People were evicted from homes, had their savings accounts totally wiped out, and were left with nothing.

After the initial crash, it takes people willing to take a risk in order to get things going again. The over-inflation of stocks that occurs prior to a crash results in some decent bargains for various stocks. If people are cautious, but still take the risk in order to help the economy get back to its feet, it can end up helping them and boosting the economy, too.

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