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Both Crashes proved the finances of countries were tied together and economies were becoming more global. In comparison, both crashes implemented reform afterwards to prevent further stock market crashes. For example, after the stock market crash of 1929, banks lost their liquidity to make loans to people and as a result failed, therefore, The Glass-Steagall Act was created in 1933 which prohibited banks that are members of the Federal Reserve from affiliating with companies whose major purpose is to sell stocks. Likewise, after the crash of 1987, the  main reform was the introduction of circuit breakers in 1988. Circuit breakers automatically halt trading on major exchanges for a time if stock prices fall more than certain amounts. Although 1929 crash had far more drastic damage to the economy, by 1987, the US proved to have learner from its mistakes and recover to peak levels by 1989, just two years later.

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Causes of the crashes were set up by the contributing factors. For the 1929 crash, the causes were: Margin buying, stocks were overvalued, and the Federal Reserve Policy. As for the 1989 crash the causes were: Inflationary fears, stocks were overvalued, and the Federal Reserve Policy. Both crashes had two f the same suspected causes which were the fact that stocks were overrated and the federal reserve policies. Stocks were deemed as overvalued because spectators were wanting to buy stocks quickly in order to get rich quick. And we see this happen again in 1989 which lead to prices becoming way too high and eventually lead to a crash in the market. On the other hand the Federal Reserve Policy in 1929 before the crash had very strict laws that carried into the crash and caused interest rates to rise and wanted to curb speculation in the market. For 1989, the Federal Reserve Policy increased the discount rate from 5.5 % to 6% on September 4, 1987. This lead to people selling their stock because of the FRP’s announcement.

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What role did the federal government play in each of the crashes?

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What role did the federal government play in each of the crashes?

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Regarding the crash of 1929, The federal government had a major impact as the implemented Federal Reserve Policies are speculated to have been a main cause of it and the Great Depression that had followed. Before the crash, the government reduced the amount of money in circulation in the economy in order to reduce stock market speculation. This policy contributed to the falling stock prices and therefore made it more difficult for people to purchase stocks and borrow money. In addition, the people who lost money in the market couldn't even pay back their loans that they borrowed from the bank, which meant the bank could not give loans out to depositiers who wanted to withdraw money. It is often speculated that the federal government didn’t do much to help the banking system with the crisis of 1929.  On the contrary, the crash of 1987 wasn’t as devastating as the crash of 29’ because the federal government had a larger role in controlling monetary policies and putting banks at ease. The policies they adopted prevented the catastrophic events that could have been triggered by the overall loss of wealth from the crash. It is also said that because of the contribution of the federal government, a recession was prevented. Instead of people not being able to pay back their loans like in 29’ people were able to pay them back after stock prices recovered in 87’.

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1929
-seen as the end of prosperity
-2 worst days were Black Thursday-Oct 24th, 1929 and Black Tuesday- Oct 29th, 1929
-stock market prices increased dramatically in 1928
-Dow Jones Industrial Average reached a peak
-Stock prices quickly fell by 10% and then rose by 8% again
-panic selling appears on October 23rd and 24th
-13 million shares were traded and usually only 4 million shares per day
-Technology could not keep up with the quick trading
-Largest bankers were alerted to this crises and announced that they will buy stocks for more than the going price so they could prevent panic selling
-President Hoover calmed the country down for a few days, but panic selling began again
-Two weeks after the crash, the average prices wee half the amount of what they had in the beginning
-Stock prices continued to drop until 1932
-Consumers and businesses were less willing to to spend money
-banks failed
-increase in unemplyment
-margin buying, stocks were overvalued, federal reserve policies, the Smoot Hawley Tariff Act, the state of the economy, and the psychological reasons caused the crash
-The Fed decreased the money supply in the economy
-the Fed made it more difficult to borrow money and buy stocks
-by not providing money to increase bank reserves, the Fed contributed to further declines in stock prices
-fed policies also contributed to the collapse of the banking system

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In October of 1929 and 1987,fear and panic began to set in, both caused by stock market crashes. While both crashes had significant differences, both had startling similarities. Both crashes had similar causes where investors wanted money and speculation led to a rise in stock prices which ultimately caused the fall of those prices later on. However, they also had differences in causes. For instance, in the crash of 1929, buying on margin which is the purchase of an asset by paying the margin and borrowing the balance from a bank or broker ultimately hurting banks. Both crashes led to an interruption in communication such as with telephone lines in 1929 and phone network computers in 1987. Each crash had different effects. The 1929 crash was followed by the Great Depression and recovering from the crash took nearly 25 years. The crash in 1987 did not have as serious of an impact on the economy and the market recovered after just two years. Similarly, following both crashes there were reforms to prevent further stock market crashes.  Ultimately, the role of the Federal government was very contrasting during each crash. During the 1929 crash, the federal government did little to help with and by not providing money to increase bank reserves, the Feds contributed to further declines in stock prices. However, in the stock market crash of 1987, the federal government was a lot more active in working to provide money to banks to prevent what had happened in the last crash. In the end, both crashes had few similarities, while differing from one another.