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Welcome to our Wall on the Stock Market Collapse! (Part 2 of 2)

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Welcome to our Wall on the Stock Market Collapse! (Part 2 of 2)

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There have been several stock market crashes in history, but none more prominent than the two we are going to cover.
The 1929 Stock Market Crash (Covered 1/2) Written by Gabriel Koeder
and
The 2008 Stock Market Crash (Covered in 2/2) Written by Milla McCagherty

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Article #1: The “Great” Recession in Canada: Perception VS Reality

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Article #1: The “Great” Recession in Canada: Perception VS Reality

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https://www.bankofcanada.ca/2011/03/great-recession-canada-perception-reality/

Summary:

When the stock market crash of 2008 hit, it spiked the unemployment to more than 30 million Canadians. This is a shockingly large number considering the Canadian population in 2008 was just over 33 million. Thankfully for Canada, it was not the “epicentre” for the crisis during the crash. Although the country handled it well, it did result in a massive slowdown for the global economy. It also had a direct impact on foreign trade due to other countries dealing with the crash as well. Canada had prepared to absorb the “shocks of crisis” by having a solid position and a relatively healthy state of households gave the “flexibility to withstand” the crisis that occurred.

Why this article was chosen:

We chose this article as it had lots of interesting information pertaining to the topic. This information also came from a valid source. This article was written a few years after the initial crash which goes to show how long a financial crisis can last and remain in importance. This seems concerning but information in the article goes on to say how well Canada handled the crash. This gives hope for future financial crises as they are unfortunately inevitable and will arise. Hopefully, the government and individuals have learned from the past on what to do and what not to do in order to successfully get out of a financial crash as successfully as possible.

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Video #2: Warren Buffett explains the 2008 Financial Crisis

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Video #2: Warren Buffett explains the 2008 Financial Crisis

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https://www.youtube.com/watch?v=k2VSSNECLTQ

Summary:

Through the duration of this video, the economy was described as a train. Picking up cargo and people and eventually derailing. The derail was the 2008 stock market collapse. The housing market was described as a bubble, as it eventually popped and deflated. According to Warren Buffett 50 million people had mortgages out of 75 million homeowners. This collapse affected 40% of households with remaining mortgages. The government had fast action which was the proper way to deal with this situation as a “fog of panic brings rumours” and misinformation.

Why this video was chosen:

This video was decided on as it gave a more personal insight to how things were perceived and gave a more understanding approach. It is generally easier to comprehend a topic when it is described in a basic manner with easy to grasp metaphors. Warren Buffett had gone on to give perspective that despite a collapse occurring, factories, farms, etc, remain and will eventually become functional again after being idle to continue to assist the economy.

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Article #2: Recession of 2008-09 in Canada

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Article #2: Recession of 2008-09 in Canada

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https://www.wealthsimple.com/en-ca/learn/2008-market-crash

Summary:

As mentioned on numerous occasions, Canada was not affected as harshly as other countries like the US and Europe. The crash is said to have been caused by a surge and collapse of U.S. housing prices. Having lower interest rates created a higher debt ratio for Americans. A large amount of loans had been made to high-risk borrowers, who inevitably couldn’t handle their debt ratio. Unfortunately, mortgage debts exceeded the value of homes causing people to become homeless and have their homes reclaimed by banks. Another factor in the crash was a mass amount of foreign investment, mostly from China.

When the crash happened, it caused Canada to have a collapse in oil. Thankfully, unlike American banks, Canadian banks had regulations in place to prevent them from making high risk decisions. This resulted in maintaining lower debt to equity ratios.

Why this article was chosen:

We decided to pick this article as it was a previous source we had used. This article had lots of information on many topics related to the stock market crash, allowing us to learn more. It covers the information well and allows you to understand how the American crash was directly linked to the Canadian one in multiple ways. It was interesting to learn a huge benefit to Canada was the regulations put in place on our banks and how that maintained a ratio that protected them. Seeing this benefit brings some comfort in the thought that Canada is equipped with preventative measures and a plan for potential crashes.

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Video #1: Canada and the 2008 Financial Crisis:

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Video #1: Canada and the 2008 Financial Crisis:

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https://www.youtube.com/watch?v=-JMJT7X_9VE

Summary:

Canada did not experience as drastic of a crash in comparison to the United States. Canada had been in a well-prepared place financial in multiple aspects prior to the crash. Overall debt levels were low, the government wasn't in a position of deficit and individually, Canadians didn’t have extreme mortgages with high ratios of debt. There was a financial conservative behaviour with both the government and individuals. Being in this financially prepared and stable position put Canada in a rather financially secure position when the 2008 stock market crash occurred. Canada went through the crash in a stronger position from the financial decisions and planning from 10-15 years prior.

Why this video was chosen:

We chose this video based on the title alone. This video was done by a financial corporation so we felt the perspective would be informative and give proper insight. We had been curious to learn more about why Canada hadn’t been hit as hard from the crash opposed to other countries. Learning that Canada wasn’t hit as hard due to planning and being in good financial standing is a good takeaway for any individual. It is always important to plan for the future and be prepared for any potential financial emergency you could not foresee. Creating an emergency fund can also assist with this.

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1.What did you learn about your topic that surprised you the most?

What I find surprising is the lack of regulations from banks in the USA. Thankfully in Canada we have our big 5. This gives security to the banks as well as Canadians. Banks abruptly shutting down in America isn’t unheard of. Learning they have more flexibility to have a hand in risky decisions seems frightening. It is comforting knowing Canadian banks have great security.

2. Provide a real-life example of how this topic is relevant or interesting

for you.

When I was 10, my grandmother heavily experienced the collapse. I remember her stress and concerns. Now that I am older and have my own money in an RRSP I relate to that stress as I watch COVID-19 have a negative impact on my investments.

3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

I think something important to pass on and hold onto is to always maintain a level of security. It never hurts to maintain preventative measures but also staying on top of the news and economic levels to be aware.

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This image of a graph shows the drastic drop in the market during the 2008 stock market collapse. This also shows that despite the collapse happening, the economy will rise and return. As shown, it does take a few years to start to balance out and there will always be drops in the market - usually unforeseen.