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The Stock Market Crash of 2008
October 10, 2008 10:03 AM
ABC News’ Betsy Stark reports: In 1987, it happened in a day. In 1929 it happened in two days. Now it has happened in seven days, but the result is same. The stock market has crashed.
The technical definition of a crash is a precipitous decline of 20 percent. That's how far the Dow Jones industrial average has plunged in the last seven trading days. Markets around the world have followed suit, guilty of the same over-leveraging and exposed to many of the same bad bets. This is what a global bear market feels like.
The professionals say the panic-selling and naked fear are signs that a bottom to this agony could be near. But no one knows for sure.
Individuals and institutions are bailing out of stocks for the safety of savings and checking accounts, treasury bills and gold. The end of the ban on short-selling Thursday may be a factor at play, allowing big investors once again to bet against stocks going up. And hedge funds and mutual funds alike are being forced to sell their investments in good companies -- adding fuel to this global wildfire -- as margin calls multiply and growing numbers of customers seek redemptions in this meltdown.
Investors remain skeptical about the ability of the various bailout plans to work. AIG burned through $85 billion in two weeks. The Federal Reserve announced it was willing to lend directly to companies unable to get loans in the commercial paper market and the result so far is fewer loans at higher rates. The lack of trust among counterparties continues.
The weeks-long process -- now beginning -- of trying to find a fair price for the bad assets on bank balance sheets has kept banks on edge. Until they know how much they can sell those assets for, they won't know whether the sale of those assets will make them weaker or stronger. Ironically, the $700 billion TARP plan seems to be perpetuating the freeze in the credit markets rather than thawing it. That's one reason Treasury Secretary Henry Paulson is now talking about doing what the British have done, which is make direct investments in big banks in return for equity stakes for the taxpayer.
But this is not just a market event. The impact on the "real economy" -- the one we live and work in -- will grow deeper the longer the crisis goes on. The Wall Street Journal estimates today that investors have lost $8.4 trillion in wealth in the past year. We are already seeing the consequences of that. As consumers hunker down, consumer companies will suffer. Look no further than General Motors.
This weekend finance ministers will meet in Washington to talk global strategy. With global markets crashing in lock-step, they will need to come up with some answers. But if they cannot or do not, will the bottom keep falling out from under? Judging from what happened in Asia overnight, what's happening now in Europe and the grim signs of another sell-off on Wall Street today, investors are not waiting to find out.
October 10, 2008 | Permalink | User Comments (51)
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What? Didn't they think that this would happen?
Posted by: gigi | Oct 10, 2008 10:24:18 AM
all that wonderful government rulings from 2000 to 2006
that we are still cleaning up from.
when historians look back at the years that almosst destroyed us
2000 to 2006
and they will say
NEVER AGAIN.
Posted by: dl | Oct 10, 2008 10:25:57 AM
Time to call Obama ("They'll call me if they need me").
Posted by: tina | Oct 10, 2008 10:32:05 AM
No my friends. We should call John McCain. He knows how to fix this. He will suspend his negative and creepy campaign to rescue us all.
Posted by: will | Oct 10, 2008 10:42:07 AM
And McCain is spending his time attacking Obama with some made up charge, and he doesn't understand why he is behind.
Give it up old man.
Posted by: The Unshrub | Oct 10, 2008 10:43:18 AM
Why are the same so called 'experts' who were confident of the market a month ago, and telling everyone to hold tight a week ago, still used by news networks? It's comical watching 'experts' interviewing other 'experts'...the same ones who know no more than zip. Wake up people...you will do as well reading tea leaves as the advice you get from financial advisors and other self-annointed gurus.
Posted by: ken | Oct 10, 2008 10:57:05 AM
Unshrub: "And McCain is spending his time attacking Obama with some made up charge, and he doesn't understand why he is behind."
Agreed. Even though I like (liked) the fellow it is bizarre that he's desperate to dig up dirt when the average American family is facing a loss of $44,000 in pension funds, has added about $16,000 in Federal debt, wil see their home decline in value by about 35% AND the crisis isn't at bottom.
Posted by: ken | Oct 10, 2008 11:01:24 AM
The American people are ready to
replace the whole congress of 535 members[including McCain and Obama]
[435 house members plus 100 senators].
Outlaw lobbyists,special interests,also replace the
current administation,its cabinet,the
SEC,the CEO'S, executives, and the people involve with wall street.
Pass strict laws against corruption and enforce the law.Follow the costitution
of U.S.A.
That's the ONLY CURE to our economic
prosperity........
Posted by: Nicholas | Oct 10, 2008 11:01:33 AM
We need to start making these GREEDY THIEVES held accountable for their actions. Take some of their houses ,cars and vacations away from them and give them to the taxpayers.Oh by the way, their end of years bonuses would go a long way to help out as well.
Posted by: Linda | Oct 10, 2008 11:25:13 AM
Dear Stupid People Who Continue to Support Me:
The fundamentals of this economic toilet bowl are strong.
Sincerely,
John McCain
Posted by: Jason | Oct 10, 2008 11:28:58 AM
I agree with Nicholas, I am voting for anyone but an incumbent!
Posted by: debbie | Oct 10, 2008 11:44:09 AM
Ron Paul for Treasury Secretary or President.
Posted by: John | Oct 10, 2008 11:47:06 AM
As McCain predicted to Letterman, the economy has "cratered". We have a final debate coming up - I would appreciate it if these guys could take their focus off the ear-marking pork barrels long enough to do some straight talking about how our future President intends to deal with this mess. (I'll allow five minutes a-piece: for McCain to insist that Obama have the decency to admit to being a terrorist; and for Obama to respond). The other 80 minutes really needs to be on the economy.
Posted by: chester burns | Oct 10, 2008 11:49:10 AM
Linda: Yes, we really do need to make some of these Fat Cats pay. They've bled us dry. I think a lot of us have been wanting that kind of justice for a long time but we know how corrupt everything is and it seems like an impossible dream. Even now, I expect that they have a long list of small fry (relatively speaking) that they are ready to grill and toss up to us as token sacrifices. And we all know why. Because the biggest slices of corruption are intertwined with the politicians. All we want is a fair deal for the taxpayer - and we know we haven't been getting it and it sux. Well, this unfolding mess is the straw which has broken the camel's back. We are going to have a long and drawn out recovery coming back from this one, and I'll be voting OUT corruption and ineptness and IN for the 'outsiders' who want to nail those Fat Cats.
Posted by: chester burns | Oct 10, 2008 11:59:22 AM
Sorry guys, but neither candidate will be able to fix this mess.
Both have no logical plans to fix this, I guess the next few years are going to be the worst we may see in our lifetimes.
Posted by: Adam | Oct 10, 2008 12:03:22 PM
Consider this: JPMorgan Chase (the Rockefeller bank) comes out smelling like a rose, despite making as many fraudulent loans as any of the tanking banks. Check their stock price. Now the US government--like the UK and others--is making noises about nationalizing banks. Who will be their cornerstone? When the government owns your bank and cash flow, will you be keen to exercise those quaint Constitutional rights?
Does Aaron Russo still sound crazy?
Posted by: gabriel | Oct 10, 2008 12:56:32 PM
Wish there was an indpendnet candidate for this election - we are given planted Obama for getting excited and cheering in the time so biggest heist of the century is happening in USA.
No Wonder why Hillary lost - now we understand - I am not Hillary supporter
Posted by: Quirky | Oct 10, 2008 1:41:40 PM
Why cant we just cap mortgage/equity line interest rates at 5%, credit card rates at 6%, and reduce the capital gain tax to 6% for the next two years. This is a quick fix to stimulate the economy and requires no oversight by the government.
By doing so, most people will refinance their homes to a lower payment, credit card payments will be signicantly lower and trading in both stocks and real estate will significantly increase in light of a tax break. This will cause tremendous investment back into the stock market and will serve to stimulate real estate transactions.
In the end, money will start changing hands again and the future of our economy will stabalize and grow incredibly.
Posted by: Greggo | Oct 10, 2008 1:49:46 PM
When we help the poor we have help the good ones as well as the bad ones. Now we have to punish the rich, both the good ones and the bad ones.
Posted by: Craig Travis | Oct 10, 2008 1:50:50 PM
Socialism is the only solution for this crisis in capitalism.
We should nationalize 50% of the rich people assets immediately, and then bailout out our national debt, foreclosing homeowners, wall street,and main street. The rest of the money from this kind of nationalization should be enough to give every one of the US citizen $5000 pocket money for buying whatever they like as a second economic stimulus package. God bless America
Posted by: simon | Oct 10, 2008 2:15:44 PM
It is the decline of morality that brought on this crash, which was fueled by greed and the love for pleasure, and is only through trusting in God that it can be fixed. After 911 congress was singing "God bless America" but soon after was trying to remove him from the very institutions God himself established. Governments, schools, courtrooms and even traditional marriage has been under attack by corrupt lawmakers wanting to remove God's commands from view. But if we the church in America will stand in the gap and humble ourselves and pray we will see the biggest explosion in stock market history. Every nation is either under a blessing or a curse depending upon the condition of the church of Jesus Christ within it. Every promise of God is always trustworthy. The Word of God is what everyone should be putting their stock into. The returns are out of this world!
Posted by: Djmartinusen | Oct 10, 2008 2:32:27 PM
The "Community Reinvestment Act" (Thanks Democrats) caused the housing bubble. And the "war on terra" destroyed waht was left of our economy. (Thanks Republicans) And NAFTA, GATT, and the WTO sold out all of our infrastructure to foreign countries. Can we FIRE these bastards YET! CLEARLY the incumbents aren't acting in the interest of their citizens, and CLEARLY aren't listening to them! (Bailout for Billionaires bill) Can we PLEASE throw them OUT NOW!!! VOTE THEM OUT OR SHUT THE HELL UP!!!
Posted by: hmn | Oct 10, 2008 2:40:23 PM
" And McCain is spending his time attacking Obama with some made up charge, and he doesn't understand why he is behind"
I agreed he is pretty busy saving his own campaign after making so many mistakes, he is struggling just like Hillary a few months ago. How can you count on someone who could not run his campaign effectively to save the economy ?
Posted by: pmp | Oct 10, 2008 2:49:47 PM
www.zeitgeistmovie.com
You'll understand what's going on after watching this.
Posted by: oobe | Oct 10, 2008 4:22:38 PM
djmartinusen:
Are you KIDDING?????
Posted by: Amy O'Flaherty | Oct 10, 2008 4:31:47 PM
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