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1.	The Canadian Encyclopedia: "The Great Depression in Canada"

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1.	The Canadian Encyclopedia: "The Great Depression in Canada"

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The Toronto Stock Exchange (TSX) suffered its worst collapse in 1929 as a result of the Great Crash which wiped out all investors before starting a decade-long economic downfall. The stock market drop reached approximately 50% as financial institutions and commodity and industrial companies suffered the worst losses. The Toronto Stock Exchange experienced lasting market depression throughout the entire 1930s period. The combination of speculative trading and weak regulations and margin purchase activities intensified the economic downfall during the market collapse. The market achieved recovery in the 1940s because of economic expansion during wartime. The market event caused Canada to establish stricter financial rules.

The Canadian Encyclopaedia proved useful because it delivers extensive historical analysis showing how the 1929 Great Depression destroyed the TSX. This source describes how poor regulatory oversight combined with speculative trading and excessive margin purchases transformed the collapse into one of the most severe financial disasters in Canadian history

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The wheat glut of 1928 threw the Winnipeg Grain Exchange into a spiral, triggering a depression in Canada's economy.

It began to take shape on 24 October 1929, Black Thursday. "Stock Speculators Shaken in Wild Day of Panic," shouted the front page of the next day's Toronto . The New York Stock Exchange, the accompanying stories reported, had experienced massive declines in wild trading, with a record 12.8 million shares sold. Thousands of accounts were wiped out before leading bankers and industrialists intervened to halt the slump. The dread extended to the Toronto markets, the Globe declared, and "rocked" share prices there. In Montréal, forced selling ran rampant, and practically every stock finished the day down.

"The biggest crash ever recorded," lamented the famed British economist John Maynard Keynes, whose own investments were entirely gone by the end of the year ( see Keynesian Economics).

Tuesday, 29 October - or Black Tuesday - was worse still. On Wall Street, 16.4 million shares were sold, almost 4 million more than Black Thursday's unprecedented totals. The New York Times industrial average plummeted, eliminating a strong year's gains, and the investment giant Goldman Sachs Trading Corporation was reduced to 58 per cent of its worth the night before.

Credit: Library and Archives Canada/C-020594.\r\n

In Toronto and Montréal, liquidation records were set. Horrified investors clogged the financial districts, while employees in the exchanges and the brokerage houses worked themselves to near-collapse in an attempt to corral the paperwork. The Canadian Annual Review of Public Affairs reckoned that "never before the 1929 crash had amounts that ran into billions of dollars been lost on the Canadian Stock Exchanges in so brief a period of time." In Montréal, some 500,000 shares were sold (5 times the usual amount); in Toronto, 330,000 were sold (13 times the usual).

"The singular feature of the great crash of 1929 was that the worst continued to worsen," wrote Canadian-born economist John Kenneth Galbraith in his seminal book The Great Crash 1929 (1954). The markets jumped back to life, but briefly. The setbacks returned and they persisted.

From the peak of the bull market in 1929 to mid-1930, the 50 most active Canadian stocks diminished on average to well under half their market value. Shareholders in International Nickel and Imperial Oil lost more than $500 million each, those in Canadian Pacific Railway over $60 million.

Standard Oil of New Jersey's John D. Rockefeller, the Bill Gates of his day, was caught up in the turmoil. On 13 November 1929, yet another disastrous day for the markets, he put his family's money behind a guarantee that his enterprise's shares would not fall below 50. In early 1932, the price was 20.

Historians and economists debate the importance of the Great Crash. Some claim that it brought on the Great Depression that blighted the 1930s across the industrialized world; others scarcely mention it in their narratives of the decade-long economic ordeal, an international phenomenon with many origins and explanations.

The economic downturn seemed moderate enough when Conservative leader R.B. Bennett hit the election trail in 1930. But Bennett was able to use it to good effect to defeat William Lyon Mackenzie King's Liberals, who'd been in power for nearly a decade and were reluctant to acknowledge the crisis brewing in Canada.

Six months after the election, Prime Minister Bennett realized that the country was in a severe economic depression. The low point came in 1933, when national output and exports - crucial then as now to the Canadian economy ( see Economic Indicators) - were down a third from late 1920s levels. Farms of the West were in crisis ( see Drought). Nearly a third of the workforce was unemployed.

The rich and well-stuffed Bennett was the butt of cruel jokes and the symbol of everything Canadians loathed. Though he tried to turn the tide, establishing the Bank of Canada and presenting his New Deal for social service reform in 1935, it was too little too late. In the next election, Canadians ousted Bennett.

The economy struggled back, yet very slowly, and a late 1930s recession interrupted the upward trend ( see Business Cycles). In 1939, there were still hundreds of thousands of Canadians on what passed for financial relief, with monthly rates for a family of five varying from $60 in Calgary to $19 in Halifax. This was before the rise of the welfare state in the ensuing decades.

Year upon year of economic woe set peoples against one another in a global depression that left few markets unscathed. In response, governments heaped on the tariffs, wanting to protect themselves and punish others ( see Protectionism). Democracies turned in on themselves, selfish and frightened. Capitalism had apparently failed, and its opponents were in fashion. Territory-hungry dictatorships flourished ( see Fascism). In this respect, the Second World War was a child of the Great Depression. Then, in a twist of fate, the economic prosperity of war ended Canada's Depression.

( See also Economic History.)

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The following article is an editorial written by The Canadian Encyclopedia staff. Editorials are not usually updated. In late October of 1929, terror seized th...

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Video 1

This video gives a detailed description of the stock market crash of 1929 and how it resulted in the Great Depression. The video shows that Canada, since it depended highly on exports, was in trouble as the demand for wheat and natural resources fell. The video also describes how the banking system and employment rates were impacted.

This video is important as it illustrates how the 1929 crash had a major impact on Canadian industries and led to a crisis of jobs. Unlike other sources that talk about the U.S., this video speaks about Canada's problems and how the government reacted to solve the crisis.

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2.	The 2008–09 Recession and Its Impact on the Canadian Stock Market

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2.	The 2008–09 Recession and Its Impact on the Canadian Stock Market

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During the 2008–09 financial crisis the Canadian stock market suffered major losses through substantial market value declines and substantial financier losses. The Canadian banking sector stayed resilient throughout the crisis yet the stock market declined because of its dependence on international trade and commodity prices together with market sentiment. The Toronto Stock Exchange (TSX) underwent a severe market decline as the S&P/TSX Composite Index started at 15,073 points in mid-2008 and dropped 50% to 7,566 points in March 2009.

The addition of this source was essential because it explores the effects that international financial instabilities had on Canada's stock market. The stock exchange showed its most severe decline since 1929 when it fell to 7,566 points from its initial value of 15,073 points. The website draws attention because it analyzes how Canada's trading relationships and commodity dependence exposed the market to high risk during 2008–09 financial crisis.

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Origins

While its underlying causes are varied and still subject for debate, it is widely acknowledged that the global financial crisis was triggered by the surge and collapse of United States housing prices during the 2000s.

US Housing Market

The US economy had gone into recession in 2001, and the US Federal Reserve - the country's central banking system - reduced interest rates as a counter-cyclical measure ( see Monetary Policy). Lower interest rates made it easier for households to carry larger amounts of mortgage debt, and so the demand for US housing increased. The resulting increase in prices stimulated residential construction activity, and the resulting increase in employment and output in the housing sector was an important factor in the recovery in the US economy.

A contributing factor behind the surge in housing investment was a massive inflow of foreign investment into the United States, notably from China: by 2006, the US current account deficit reached 6 per cent of GDP ( see Balance of Payments). Much of this foreign capital was subsequently channeled into the US housing sector, offering larger pools of savings for households seeking mortgage financing.

The housing market is well-known for its cycle of booms and busts, and it became apparent in the mid-2000s that US housing prices showed many of the signs characteristic of a "bubble." Asset-price bubbles occur when investors make purchases based on the expectation of being able to sell the asset later at a higher price, and not on the inherent qualities of the asset itself.

US housing prices finally peaked in early 2006. Activity in the housing sector slowed, and the US economy began to undertake a transition of investment and employment to other sectors. This transition was not seamless, however, and the United States fell into recession in December 2007.

Financial Crisis

Initial concerns were focused on how declining housing prices affected household wealth: lower levels of wealth are generally associated with lower levels of spending. On its own, the wealth shock was generally viewed as manageable: estimates for the losses were less than those suffered during the dot-com stock market crash of a few years earlier. But the more fundamental problem proved to be structural weaknesses in the financial systems of the United States and other countries. (Canada was an exception, as noted below.)

One contributor was the deterioration in the mortgage underwriting standard: an increasing share of loans was made to high-risk borrowers. When housing prices eventually fell, these "sub-prime" mortgages were more likely to go into default.

The increased securitization of mortgage assets, and most notably the development of Collateralized Debt Obligations (CDOs), amplified the underlying risk. A CDO gave its owner a claim on the flow of mortgage payments made by households. CDOs that offered higher-priority claims were considered to be safe assets, and traded at a premium. The development of CDO and related instruments provided a further incentive to offer sub-prime loans: purchasers of CDOs had little way of verifying the quality of the underlying mortgages upon which the assets were based.

When US housing prices fell, many homeowners found themselves underwater: their mortgage debts exceeded the value of their homes and went into default. It soon became apparent to financial institutions and other investors that many of the supposedly "safe" mortgage-based assets were worth much less than their book values. Financial market liquidity dried up as institutions became less willing to make loans, out of fear that the counterparties might go bankrupt in the near term. These fears came to a head with the collapse of Lehman Brothers, the fourth-largest US investment bank, in September 2008.

DID YOU KNOW?

Liquidity describes the ease with which an asset can be converted to cash. Liquid assets are easiest to convert to cash and lose little to no value when converted because they are valued by a broad market, such as currencies and commodities. Illiquid assets, such as real estate and collectibles, are harder to convert to cash because the market in which they are sold has fewer buyers. Illiquid assets may have a reduced value when quickly converted to cash.

Transmission to Canada

Oil prices continued to surge during the first months of 2008, and the Canadian economy was at first little affected by the US recession: employment and output continued to expand. But the US financial crisis in the fall of 2008 affected global financial markets, and Canada was not exempt from its effects. The collapse of the prices of oil and other Canadian commodity exports compounded the effects of the financial crisis, and the Canadian economy fell into recession in October 2008 ( see Commodity Trading).

Canadian Policy Responses to the Recession of 2008-09

Stabilization of Financial Markets

The immediate priority of policy-makers in the United States and other countries was dealing with banks and other financial institutions that had suddenly become insolvent. Financial institutions play a key intermediary role in the economy, and governments acted to minimize the disruptions caused by bank failures. Banks that were sufficiently large were considered "too big to fail," and had to be bailed out. Indeed, the fact that banks were aware that they were too big to fail produced a moral hazard problem: the belief in an eventual rescue by governments encouraged large banks to engage in risky behaviour.

Canadian policy-makers were spared this problem. Though all of the "Big Six" chartered banks - National Bank of Canada, Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Toronto-Dominion Bank - were considered "too big to fail," Canada's regulatory regime prevented them from engaging in the sort of risky behavior observed elsewhere ( see Bank Act). In particular, Canada's banks were obliged to maintain lower debt-to-equity ratios than most of their counterparts abroad. Higher debt-to-equity ratios offer the possibility of higher profits rates, but highly leveraged banks are also more vulnerable to negative shocks to the value of their assets. After the 1985 collapse of Northland Bank and Canadian Commercial Bank, Canadian regulations were further tightened ( see Estey Commission). Partly because of this stronger regulatory environment, Canada's banks were not in danger of insolvency in the crisis.

Instead, the immediate priority of Canadian policy-makers was to restore stability and liquidity to financial markets ( see Stock and Bond Markets). While Canadian investors and financial institutions were not as exposed to the sort of losses seen in the United States, Canadian holdings of asset-backed commercial paper dropped sharply in value. (The term commercial paper describes short-term, unsecured loans that companies issue in order to finance their accounts and inventories. They are usually sold at a discount but pay out at full value.) In order to avoid the sort of "fire sale" price collapses observed elsewhere, Canadian authorities persuaded investors to accept and write off short-term losses. In addition, measures such as the Insured Mortgage Purchase Program (IMPP) allowed banks to exchange illiquid mortgage assets for bonds issued by the Canadian Mortgage and Housing Corporation (CMHC). Since CMHC debt is backed by the federal government, these assets were more readily accepted as collateral for short-term lending. This exchange did not affect the government's risk exposure to the mortgage market: only mortgages that were already insured by the government were eligible for the IMPP.

Monetary Policy

The failure of Lehman Brothers made it clear that the scale of the financial crisis would soon affect the real economy. On 8 October 2008, the Bank of Canada - in concert with other leading central banks - reduced its target for the overnight rate from 3 per cent to 2.5 per cent ( see Interest Rates in Canada). This action was followed by a series of rate cuts until the Bank's policy rate was reduced to its lower bound of 0.25 per cent on 21 April 2009. (The Bank allows a 0.25 per cent deviation above or below its target rate, so a target of 0.25 per cent implies a lower bound of 0 per cent; see Bank Rate.)

Since the Bank of Canada could not reduce its policy rate any further, it felt obliged to make use of "unconventional" monetary policy instruments. Other central banks, including those in the United States and United Kingdom, had also reached the lower bound of their policy rates and began to use unconventional monetary policy tools. The reduction of the interest rate to its lower bound in Canada was accompanied with a "conditional commitment" to maintain the Bank's policy rate at its lower bound until the middle of 2010. This was the extent of Canada's experience of unconventional monetary policy instruments; unlike in the US and the UK, the Bank of Canada did not see fit to engage in quantitative easing.

DID YOU KNOW?

The term quantitative easing describes the unconventional monetary policy whereby a central bank buys government securities, or other securities, in order to lower interest rates and increase the money supply.

Fiscal Policy

The Conservative government of Stephen Harper remained in power with an increased minority after the federal election of 14 October 2008. During the campaign, the Conservatives promised to keep the federal budget in balance, and its fiscal update of 27 November outlined measures to restrain spending in order to avoid going into deficit. Subsequent economic and political developments - including an attempt by opposition parties to form a coalition government - forced the Conservatives to back away from this position. The Harper government introduced a budget on 27 January 2009 that included a two-year stimulus program, mainly on infrastructure spending ( see Fiscal Policy).

Auto Sector Bailout

The North American auto sector was troubled and in decline even before 2008, and the recession pushed General Motors (GM) and Chrysler into bankruptcy (Ford was able to withstand the crisis). Chrysler was eventually purchased by the Italian automaker Fiat and was able to continue operations.

GM, on the other hand, had no such saviour, and it was "too big to fail." The risk of a catastrophic collapse of GM's network of suppliers and associated industries forced governments in the United States and Canada to take an equity stake in GM. This injection of capital gave GM time to restructure and continue its operations. The federal government and the government of Ontario sold the last of their GM holdings in 2015.

Factors Contributing to Recovery

The efforts of Canadian policy-makers were not the only - or even the most important - factors driving the eventual recovery from recession. The Canadian dollar had been trading near par with the US dollar in mid-2008, but it depreciated sharply as the crisis deepened. By March 2009, the Canadian dollar had depreciated by more than 20 per cent, to less than US$0.80. This depreciation encouraged Canadian exports ( see Exchange Rates).

A more decisive factor was the continued strength of the Chinese economy during the global financial crisis, which supported a recovery in the price of oil and other resource commodities. Oil prices rebounded from a trough of US$30 per barrel in December 2008 to more than US$60 per barrel in May 2009.

Turning Point and Recovery

The US recession was severe enough to draw comparisons with the Great Depression of the 1930s, but the Canadian recession of 2008-09 was milder than the downturns of 1981-82 and 1990-92. The main Canadian business cycle indicators rebounded in the spring and early summer of 2009. Monthly GDP attained its trough that May, and the unemployment rate peaked in June. Monthly GDP recovered its pre-crisis peak in October 2010, and employment losses were absorbed in January 2011. US employment did not recover its pre-crisis peak until May 2014.

Aftermath and Legacy

Recovery was slower in the United States and in Europe, and the sluggish growth of the world economy acted as a drag on Canadian economic growth after 2011. The Bank of Canada and other central banks were obliged to maintain their policy interest rates at low levels, as inflation remained weak. It was not until 2017 - almost 10 years after the United States moved into recession - that Canada and the US began to return to pre-crisis monetary policy stances.

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While its underlying causes are varied and still subject for debate, it is widely acknowledged that the global financial crisis was triggered by the surge and collapse of United States housing prices during the 2000s.

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This video explores the impact of the 2008 financial crisis on Canada even though its banks were more stable than U.S. banks. It illustrates how Canadian stock markets fell, businesses were suffering, and housing prices changed. The video explains the actions taken by the government to stabilize the economy.

This video is different from other content that only talks about the U.S. housing bubble. It offers a unique Canadian perspective, showing how the TSX (Toronto Stock Exchange) and big corporations were affected.

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The 2008 Financial Crisis - 5 Minute History Lesson

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This video talks about how the COVID-19 pandemic affected the Canadian stock market in March 2020, when the TSX lost almost 35% of its value. It includes information about government help programs, panic among investors, the economy, how long the effects lasted, and ways to recover in the market.

This video is properly relevant as it provides a current and accurate example of a stock market crash and how economic policy in Canada helped to stable the economy. In this video he perfectly explain what happened before, during, and after the covid 19 crisis.

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The COVID-19 Stock Market Rally - Why It Doesn't Mean We're Out of a Recession

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This video explores the Black Monday crash of October 19, 1987, when stock markets around the world, including the Toronto Stock Exchange (TSX), fell significantly in a day. The video covers the reasons behind why the crash took place, like computer trading and panic among investors, and how governments and Canada's economy and financial system responded. The video also addresses how recovery was achieved and what we learned from this unforeseen event.

This video is relevant because it addresses a not well-known stock market crash that affected Canada severely. As opposed to the 1929 and 2008 crashes, this one did not last long but nonetheless caused fear and pointed to problems within the stock market system. The video also addresses the fact that Canada's financial regulations became better after the crash, and thus it presents itself as a useful learning tool.

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1987 Stock Market Crash | Black Monday | #Finance

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The businessman stands in front of a large digital stock market screen, showing clear signs of distress through his head-holding position. The chart background shows declining stock values.

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An image dedicated to the Canadian stock market displays a Canadian flag and a bold red downward arrow to indicate a severe drop in the Toronto Stock Exchange (TSX).

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3.	The Oil Price Crash of 2014–2016 and the Canadian Stock Market Collapse

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3.	The Oil Price Crash of 2014–2016 and the Canadian Stock Market Collapse

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During the 2014–2016 oil price market decline period the Canadian stock market faced substantial market downturns. The Bank of Canada commodity price index demonstrates a significant 53.7% decrease following its assessment from the second quarter of 2014 until the first quarter of 2016. A bear market designation occurred for the TSX market at the beginning of 2016 when its prices declined by more than 20% from its high point in September 2014.

The choice of CityNews Toronto for this analysis was made because it delivers live financial information along with expert analysis. The article distinguifies itself from other sources by focusing on the immediate effects that oil prices have on Canada's stock market. The TSX stock market endured a bear market in 2016 after the Bank of Canada commodity price index decreased by 53.7% leading to a more than 20% market decline from its 2014 peak.

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Stock markets extend decline with another day of losses, Canadian dollar slips

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Hopes for a reprieve on North American stock markets were dashed Friday in another dismal session that capped off a turbulent start to the year. Toronto’s S&P/TSX composite index was down 2.76 points at 12,445.45, a relatively flat close that marked the eighth consecutive day of declines that left it more than 20 […]

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4.	Bank of Canada: "Canadian stock market since COVID 19: Why a V-shaped price recovery?"

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4.	Bank of Canada: "Canadian stock market since COVID 19: Why a V-shaped price recovery?"

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The Canadian stock market saw an unprecedented 37% market drop through S&P/TSX Composite Index crashes in March 2020 due to COVID-19 concerns and lockdowns and falling oil prices. During 2020 the market showed strong V-shaped recovery ending with positive results by late 2020. The stock market declined for energy companies and airlines and retail businesses but technology sectors alongside healthcare sectors experienced growth. The TSX regressed quickly due to both market investor faith and governmental backing during uncertain times.

We chose the Bank of Canada because it performs as the national financial institution which provides real-time information about monetary policies and economic responses to government interventions during crises. This website explained the role of fiscal stimulus and financial policies in creating a V-shaped TSX recovery from a 37% fall in 2020.

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Canadian stock market since COVID‑19: Why a V-shaped price recovery?

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Between February 19 and March 23, 2020, the Canadian stock market plunged due to the severe economic impact of COVID-19. By the end of the summer, the stock market had already recovered a significant portion of its losses, leaving many asking if investors see the economy through rose-coloured glasses.

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

I was most surprised by how much Canada's banking regulations allowed for a quicker recovery from market dips than other nations. Impressive Part is the resilience shown by Canada's Bank during 2008 crisis.

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

The COVID-19 crash demonstrated how quickly markets can drop but also bounce back. Seeing the TSX decline by 35% and then recover in a few months was a real-world education in market unpredictability and economic policy.

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?

A key lesson is that while stock market collapses are inevitable, markets generally show recovery in the long run. To achieve financial stability one have to be correctly informed and updated to the market situation, have to make smart choices and do not have to panic in any situation.

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Welcome to my Padlet on the Stock Market Crash and its implications for Canada. This thoughtfully assembled collection of resources examines the reasons, how they occurred, and the long-term effects of significant market crashes, from the 1929 Great Depression to more recent economic crises. As you go through this Padlet, you'll discover a variety of videos, articles, and images that offer ways in which stock market crashes affect businesses, people, and the Canadian economy overall.

By the conclusion of this topic, you will know why stock market crashes happen, their effects, and how governments and financial institutions react to them. From this knowledge, we will be able to understand many lessons about financial stability and investment.