Sunday, March 24, 2013
SEPTEMBER 29, 2008 – U.S. STOCK MARKET CRASH
2008 – U.S. STOCK MARKET CRASH
The Dow Jones plummeted by 778 points, its largest one-day drop in the history of the New York Stock Exchange. The crash was the result of the bursting of a massive housing “bubble” caused by financial institutions issuing money out of thin air many times in excess of their assets to finance many highly risky mortgages and other bizarre risky investments. The money issued for mortgages were loans, making the massive amount of new money issued (roughly 97% of all originating into our economy) as debt. The elimination on controls of the financial industry a decade earlier opened the door, but was not the root cause, of the crash that has come to be known as the Great Recession. The root cause of the 2008 crash, similar to all other bursts of financial bubbles before it, was the ability of banks to issue money out of thin air as debt (loans) many times in excess of their assets. The smaller the asset base, the greater the risk that banks will go bankrupt when their loans cannot be repaid or other investments go bad.