Business Cycle Essay

1542 words - 7 pages

Name
Professor
Course
Date:
Analysis and Argument Essay on ‘Black Tuesday’ Stock Market Crash
Financial systems both money markets and capital markets all across the world have always been susceptible to shocks of varying proportions. The stock markets for instance are very vulnerable to daily variations in the forces of demand and supply. That is, when supply of a given stock outweighs its demand, the price of that stock is expected to fall and when demand outstrips supply, the price is expected to rally. Though these changes are viewed as normal, at times the prices plummet to a level that it sets in a wave of panic among the investors (Rothman, Par 1). These panicking investors rush to ...view middle of the document...

These excess reserves were passed over to the clients as loans to purchase stocks. During that period, the financial markets were not well regulated and this created a lot of loopholes of which the financial institutions could use to make more profits. These overly liberal credit policies encouraged Americans to take too much debt in order to invest more heavily on stocks in the 1920s (Latson, Par 5 ).Besides there were evident weaknesses with the financial system at that time which are believed to have contributed to the near collapse of the stock markets. Some of the weaknesses may have included policy errors by the federal reserves, risky business models of banks, over optimism of the investors and so on. These factors are believed to have blinded economists from detecting what could go wrong.
Lancaster outlines that during the 1920s stock markets had undergone a rapid expansion period reaching its peak in august 1929 after a period of wild speculation. After that production declined and unemployment rose leaving stocks in great excess of their real value (par 4). This triggered the beginning of the gradual fall of stock prices. This decline is a believed to have been catapulted with low wages, proliferation of debt, struggling agricultural sector and excess large bank notes that could not be liquidated. In the next two months leading up to October the bourse had already shed about 40% of its value. In the week leading up to the crash major bankers had exuded confidence that the falling prices being experienced were just temporary .On that fateful Tuesday investors exchanged a record 16,410,030 shares on the New York Stock Exchange (NYSE) in a single day. That resulted into billions of dollars lost and thousands of investors wiped thus the name black Tuesday.
According to Rothman, the black Tuesday was just the beginning of the worst period in the American economic history. She claims the policy makers of that time floundered while economists were confused on what action to take (par 2). This stock market crash is believed to be one of the major triggers and the immediate precursor to the great depression (1929-1939). Lancaster explains that the federal reserves bank may have contributed a great deal to the great depression and the stock market crash. In years leading up to the great depression, the federal reserves bank had created excess reserves which were not backed by gold first to increase reserves of the American banks and secondly to stop the gold flight from the Britain to the United States and help the dwindling fortunes of the Britain’s economy(par 11). These actions of the federal reserves are also believed to have contributed heavily to the crash and the depression.
Periods after the stock market crash were the defining moments of the study of economics. Different schools of thoughts came up with theories on how to handle future financial crisis. Fisher, a believer in market economics, argued that monetary policy could...

Other Essays Like Business Cycle

Data Development Cycle Essay

1240 words - 5 pages development process. InModern database management (11th ed.). Pearson Education. 2. Lewis, J. (2008). SDLC 100 success secrets software development life cycle (SDLC) 100 most asked questions, SDLC methodologies, tools, process and business models. United States?: J. Lewis. 3.System development life cycle. (n.d.). Retrieved from http://www.benderrbt.com/Bender-SDLC.pdf 4.Radack, S. (n.d.). THE SYSTEM DEVELOPMENT LIFE CYCLE (SDLC). Retrievedfrom http://csrc.nist.gov/publications/nistbul/april2009_system-development-life-cycle.pdf ----------------------- 1

Accounting Cycle Paper

1575 words - 7 pages Running Header: Accounting Cycle Paper Accounting Cycle Paper Sharon Smith Steven Uhl, ACC421 The Accounting Cycle is a series of steps which are repeated every reporting period. The process starts with making accounting entries for each transaction and goes through closing the books. Use this tutorial for an overview of the accounting cycle, covering activities required both during and at the end of the accounting period. The primary

Bob's Chocolate and More Accounting Cycle

1663 words - 7 pages Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business on October 1, 2011. The following transactions occurred during the month. 1. The company issued 6,000 shares of common stock at $15 per share. 2. The company acquired office equipment on October 1 for $30,000 cash. The equipment was used for administrative tasks. 3. The company purchased $15,000 of ingredients on account. 4

Assesment Cycle

993 words - 4 pages Without assessment student and teacher have no parameters set to work by , no direction during the teaching process and no way of understanding the students competence prior to examination and end of the course or session. Assessment is the overall tool we have for measuring the student and teacher’s suitability and learning. Assessment can come in many forms in the teaching sector and each has its own merit and value alongside the others

accounting cycle

843 words - 4 pages  Accounting Cycle ACC 421 March 2, 2014 Kimberly Barnett Accounting Cycle The accounting cycle is an important part of the financial accounting system for an organization to maintain an organized record of transactions and to report the company’s financial status. “The accounting cycle is a methodical set of rules to ensure the accuracy and conformity of financial statements” (Investopedia, 2015). Publicly traded

Cycle Composition

1186 words - 5 pages MA441: Algebraic Structures I Lecture 12 15 October 2003 1 Review from Lecture 11: We showed how to organize a list of the subgroups of a group into a diagram called the lattice of subgroups. We reviewed the definition of a permutation. We defined the group of permutations of degree n, denoted Sn, and showed that it has order n!. 2 Theorem 5.1: Products of Disjoint Cycles Every permutation of a finite set can be written as a cycle or

Communication Cycle

823 words - 4 pages The communication cycle is a fundamental part of all of our lives. It is the structure in how we communicate. There are different ways of communicating and as we are communicating we are gaining more knowledge all the time. The communication cycle is useful to use when communicating sensitive subjects. The communication cycle structure starts with aim. At this stage we aim to think about how we will communicate the information and who we

Refrigiration Cycle

1432 words - 6 pages Refrigeration Cycles Content: The ideal vapor-compression refrigeration cycle vaporActual Vapor-Compression Refrigeration Cycle VaporHeat Pump System for Heating and Cooling Innovative Vapor-Compression Refrigeration Cycle VaporGas Refrigeration Cycles Absorption Refrigeration Systems Refrigerants Selection Refrigeration affects many areas of your life The obvious: Refrigerator/Freezers allow food preservation Air conditioning

Sustainable Investment Analysis of the Life Cycle Impact of Heidelberg Cement's Operations

2155 words - 9 pages Analyze the life cycle environmental and social impact of Heidelberg Cement’s operations, the concerns of different stakeholders on these impacts, and how these stakeholders concerns affect the company. Cement is considered to be one of the most useful materials ever developed by man due to its strength and durability. However by virtue of its chemical and mineral composition as well as its manufacturing process cement production is deemed

The Water Cycle

412 words - 2 pages The earth has a limited amount of water.Thatwater keeps going around and around andaround in what we call the "Water cycle".It is theonly way that Earth can be continually suppliedwith fresh water.The sun is the most importantpart of renewing our water supply.It can be solid(ice),a liquid (water), or gas (water vapor).Water on earth is always changing.How do these changes happen?It is made up of a few main parts:evaporation(and transpiration

Geography Water Cycle

4277 words - 18 pages 131Water cycle/ river basin/ fluvial processes and features3Hydrological Cycle (Water Cycle)(Ref. Part 2:Managing river and coastal environments: A continuing challenge) Figure 1: The water cycle (also refer to Fig ure 4 ( P.5) ) http://berkeley.edu/news/media/releases/2006/02/23_water_pix.shtmlExercise: Fill in the blanks of Figure 2 which shows the f low of water in different spheres of the earth Atmosphere Land Ocean (ix

Related Papers

Analysis Of A Business Cycle

1214 words - 5 pages say that owing to the unique relation between final goods prices, wages, unemployment rate, and the state of the business cycle the overall impact of the economy on the firm engaged in monopolistic competition is not very bad, unless they are living beyond their means. The stickiness of prices imply that the impacts are staggered over time, but if the firm stays within its means chances are it will survive business cycles, though some may have to

Analysis Of The Business Cycle

1195 words - 5 pages Analysis of the Business Cycle Professor Amiel Managerial Economics & Globalization March 15, 2011 Strayer University ABSTRACT The purpose of this paper is to take an economical and statistical look of where the economy is headed for the next coming years. Review the outcome of the economy over the past three years and what direction it’s going. Based on this review, it will show the current state of the economy and the impact to the

Accounting Cycle Essay

934 words - 4 pages The Accounting Cycle The Accounting cycle of a business require a set of steps to that keep a record of events and transactions that happens during an appointed time span. The time span typically last a month. The accounting clerk usually performs a multitude of task within an accounting cycle. Such as, general clerical duties, accounting and bookkeeping functions, and process account payables and receivables as needed. (Winthrop). The

Accounting Cycle Paper

756 words - 4 pages Accounting Cycle Paper ACC/421 Accounting Cycle Paper In this paper I will outline the purpose of both accounting and financial reporting within an organization in general. I will also give a description of the people, processes, and systems that are a part of the accounting and financial reporting processes followed by a conclusion. Purpose of Accounting The purpose of accounting to gather and report on any financial information within