After every few years, a horrible stock market crash becomes the reason for massive unemployment and huge financial unrest in a country. The effects of the stock market crash can be far reaching not just in terms of the job status of thousands of people but also in terms of financial instability of the whole country which threatens investors. A stock market crash is defined as an abrupt drop in percentage of the total value of a specific trading market. Stock market crash results due to various factors; these factors could be economic or even political. Big and established businesses can lose their value overnight when stock holders pull out their share out of fear. When this happens, businesses start to shut down across the nation.
Businesses are forced to halt their productions and their corporative activities because the individual stocks held by the public are now becoming unavailable. These stocks are actually the fluid currency of these businesses and it is this money that they use to continue their pre-scheduled projects. With the loss of money, they are left with no other choice but to shut down their offices. Another step that these companies take to mitigate their financial losses is to downsize their employee strength. By letting their workers go, they hope to control the depth of their loss.
The smaller businesses are also affected in consequence to how the stock market crash affects the larger businesses. As the consumer restricts spending due to lack of confidence in the market, the smaller businesses also take a step to protect themselves from possible financial damage. Below is a brief description of 6 of the worst stock market crashes that happened in the last ten years.
The 2011 stock market crash was certainly one of the worst stock market crashes in the last decade. It was a sharp drop in the percentage in different trading markets of the various stock exchanges across Europe, Asia, United States and the Middle East. This stock market crash resulted due to the fact that the government of United States lost the AAA credit rating and also because of the European sovereign debt crisis and France’s AAA credit rating. The stock percentage started to drop continuously and within a period of two weeks, the Dow went down over 2,000 points. Perhaps the gold market was affected the most as its value increased up to $1,750. Major stock market crashes were seen in Japan, Thailand, France, Germany, Switzerland, Turkey, United Kingdom, Canada, United States, Australia, Dubai, Abu Dhabi and Qatar.
Another one of the worst stock market crash this last decade occurred in 2010 in the United States Dow Jones stock market. This crash is also called ‘The Crash of 2:45’, ‘The May 6, 2010 Crash’, ‘2010 Flash Crash’ or only as ‘Flash Crash.’ On May 6th of 2010, the Dow Jones Industrial Average abruptly descended almost 9%, which is equivalent to around 1000 points. Although the plunging was huge, it was almost completely recovered within a matter of a few minutes. However this stoop caused it to become the biggest ‘One-day Point Decline.’ Although there was a general downturn in the stock market that day because of the apprehensions about the debt crisis in Greece, a 1000 point plunge was still not expected but with the Dow Jones suddenly going down 300 points, the equity market went down too with an additional 600 point loss. However with 15 minutes, this loss was almost recovered.
The Flash Crash was preceded by the European stock market crash that occurred in April of the same year. This crash is also known as the ‘European Sovereign Debt Crisis’ or the ‘Eurozone Crisis.’ This crash actually spread over a long period because the euro countries were facing difficulties in repaying their debts to the government. This crash was caused by the fear that had developed in the investors due to the sovereign debt crisis.
As the 2007 – 2010 financial crisis escalated, the real estate of Dubai plunged downwards after seeing a boom in business for six years straight. As a result, in November 2009, the government of Dubai made the announcement that the company wants all the providers to come to an absolute ‘standstill’ until it recovered from its losses. The company also had to downsize its employee strength by 10,500 employees who were working in different countries world-wide. Due to this ‘Dubai Standstill’, the company became unable to pay back its debt of US$3.5 billion by the deadline of December. Fears of Dubai’s future economy led to 3% decrease in European stocks and 1.5% decrease in the Dow Jones Industrial average.
Dow Jones Industrial Average saw its worst crash on 9th October, 2008 when it fell more than 500 points. Although a housing slowdown was underway yet the government didn’t think it is going to become that much of a problem. However, as the federal reserves tried to dissipate the bank liquidity problem, the investors started fearing a massive financial breakdown resulting from banks going bankrupt and as this came true, Dow Jones Industrial Average came to one of its worst crash in the history.
The Chinese stock market crash of 2007 is also known as the ‘Chinese Correction’ and the ‘Chinese Stock Bubble of 2007.’ In fact this stock market crash was not limited to the Chinese stock market alone, the whole global stock market say a deep plunge. This plunge caused a loss of billions of market value. While fears started to build up about how the Chinese economic authorities are going to curb the situation, there were also rumours that the interest rates are going to rise considerably. All these reasons led to the Shanghai Stock Exchange falling almost 9%. The whole global market reacted due to the financial crash that resulted in the Chinese stock market. The results were seen not only in Asia but in the Dow Jones Industrial Average in United States as well which dropped 416 points.