The Stock Market-From the Beginning to Today

Literally billions of dollars change hands every day as thousands of companies are traded on the stock market. During these everyday transactions, the lives of millions of people are affected, sometimes in a very adverse manner. The New York Stock Exchange began in East Manhattan, in front of Trinity church, some 200 years ago, when silver was traded for paper which stated the holder owned a share in the cargo which came in on the harbor ships each day. This "stock" trading flourished, and the stock exchange was born.

American Revolution Bonds

The colonial government was hurting for actual money to fund their war operations during the American Revolution and did this by selling bonds. The theory behind a bond was that it was a mere piece of paper, exchanged for money, with the idea that in a certain amount of time the piece of paper could be exchanged for a profit. The nation's banks began selling pieces of their companies to anyone with the money to buy in, furthering the essence of today's stock market.

Wall Street had somehow become a center of these transactions, and in 1792 24 men signed an agreement which started the NYSE, agreeing to sell shares of parts of companies to other people, charging commissions and fees to do so. The stocks which weren't judged "good enough" for the NYSE were traded outside on the curbs, and soon turned into the American Stock Exchange (AMEX). Today these two giants have been joined by NASDAQ as well as hundreds of other local and international exchanges which play a huge part in our global economy.

Stock Market Crash of 1929

September 4, 1929 saw the stock market hit an all-time high due to the industrial revolution. Banks were invested heavily in the market, and individual investors had borrowed heavily in order to buy stocks. On October 29, 1929, the stock market had dropped from its high in September to almost 40%, losing over 14 billion in investor dollars. The causes for this crash were attributed to margin buying, federal policy and bad banking structure; after the crash the SEC was established as a measure to "lay down the law" and punish the violators, and the FDIC was established which, even today, insures your account up to $100,000.

Market Crashes of 1987 and 2002

Following the crash of 1929 the stock market made a slow comeback, but in 1932 it hit a low that made the '29 crash look like child's play. The summer of 1932 saw the stock market lose almost 90% of its total value, erasing nearly every gain made on the market since 1897. The next crash came in October, 1987, with a drop of 22.6 % in one day, and over a half a trillion investor's dollars lost for good. After righting itself from this crash, the market once again dropped almost 50% between September of 2000 and October, 2002, totaling around 8 trillion dollars lost.

The Most Recent Crash

The stock market crash of 2008 is one we are still feeling the effects of. On Monday, October 6, 2008, the market began a week long slide, eventually falling 18.1%. It appears that October is an ill-fated month for the stock market, making investors nervous every year when it rolls around. Before the market collapsed, America had been through years of people with poor credit being given loans they couldn't afford by the sub-prime mortgage industry. Since home prices were rising, these practices were mostly ignored. Lenders could keep on making bad loans since what people owed on their homes could be recouped in foreclosure. Then housing prices began to fall, and scores of homeowners found themselves with upside down loans, owing more on their home than it was worth. Freddie Mac and Fannie Mae had guaranteed some $6 trillion in unstable loans, and were feeling the heat, and banks were falling right and left. At this time the federal government stepped in to provide "bailout" money-a short-term "fix" that we probably have not seen the final ramifications of just yet.