Why the stock market crashed:
 
What brings about the stock market crash. Imagine having put all your hard earned money in the stock market thinking it is time you made your money work for you. And you suddenly witness the downturn of the markets one afternoon. The stock market begins shedding points faster than a snake can shed its skin. That reminds you that there is no one way street on the stock market. If you gain so will you lose.
 
Let us consider the crash of the stock market in 1929. What makes up the capital of any business. It could be the raw materials that are needed to make the goods, or the buildings or the machinery that the company owns. In the twentieth century this was represented by means of stocks. Slowly, over the period of 1920 to about 1929 these stocks began to be quoted on the stock exchange at unheard of prices. The only way that the index could go was up. Till the bubble burst, it had to because how long could it withstand that kind of pressure. Stocks started plummeting and how. People began to feel the heat of it. They seemed to have lost fortunes and had to begin from where they had initially started out. So there was no new investments taking place, no infrastructure activities happening and no one buying things. Then was the turn of the banks. People began to panic and started huge scale withdrawls of their money which they had thought was safe in banks. Banks in turn tried really hard to collect the loan amounts from stockbrokers who they had lent to big time. However, these people had assets in the form of stocks which weren't of much value now. Hence banks began to falter.
 
Till the new President Franklin Roosevelt decided to take things under his control. Banks were ordered to close for a few days and when they re-opened the limits on withdrawls were reduced and with stricter controls. The mechansms put in place were that the government would help out th edepositors and banks weren't allowed to invest the money they didn't hold as capital in stocks.
 
So as they say history repeats itself. One needs to understand and learn from the past in order to move ahead to the future. Did we learn from our past experience? No we didn't. This time round the banks banked heavily on real estate and the housing industry.
 
What are the factors that bring about this downslide? The change in the global investment circle. The fact that the huge gigantic country of U.S. is in a recession and every financial institution trying to put the funds in the developing markets it will be a while before it stabilises.
 
The commodity market has also shown a lot of volatality. Once considered to be a safe bet it is no longer so.
 
The bloodbath began on September 16, when the largest fo financial institutions n the U.S. were exposed to the chinks in their armours. Then it was the turn of Europe to join in, and it spread to Indonesia, Ukraine and so forth.
 
The latest that analysts have to say is that the stock market is a volatile place to be in and one must really be strong of heart to invest one's money there.
 
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