BLOG 7: 1929: THE GREAT CRASH

       The documentary allows me to understand the feeling amongst investors in the Greatest Crash 1929 when the New York Stock Exchange started to plunged after give year of constantly growth. While no one can find out what was going on with the market, the market gains of five years were wiped out. I can feel the panic of investors at that time who attempted to get out of the market by selling out all of the stocks leading to the historic market crash. The panic reactions of investors in 1929 can be called as the irrational exuberance which was clearly described by Shiller (2015).

       There was no single, dominant cause, and that many factors worked together to bring the market down. However, the primary cause for this disaster is the lack of financial regulation environment which allowed banks to lend freely. As the consequences, there was no protection from the government for investors who lost it all in the economic collapse. Up to now, there has been many regulations that was effective set by the policy makers. Regarding to the Federal Reserve, they should have that using monetary policy to restrain investors’ exuberance may have broad, unintended, and undesirable consequences. The regulations put in place after the Great Depression helped limit the damage of the 2008 crisis, leaving us only with a Great Recession.

       From my point of view, there are some lessons I could learn from the Market Crash in 1929. Investors when participate in the stock market should obtain for themselves a specific stock investment plan alongside with the proper risk management and money management which could help trimming down the losses which can be covered by the profitable investments. In addition, it is necessary for investors to set the threshold of risk. They should not borrow the money for their brokers account. Indeed, when passing the acceptable risk level, people are not only more likely to fail but also create the negative impacts for the market as a whole.

REFERENCE

Shiller, R. J. (2015). Irrational exuberance. Princeton university press.