4 ms·

It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in t

by kvcc01 11y ago

It seems the indices are down 30% or so from their prior highs, which is unpleasant but nothing like the 1929-32 period. Even Nasdaq had cratered far worse in the early 2000s. By comparison, Dow Jones went from 381 to 41 in just about 3 years from its 1929 high, which is an astonishing 90% loss. Actually I didn't know it was that bad until I looked it up.

backtoyoujim 11y ago
From the wikipedia page about the 1929 crash ... this part was very telling: "The market would not return to the peak closing of September 3, 1929 until November 23, 1954."
- hudj1jcnapru38 11y ago
  Also interesting to contemplate the influence of WW2 in that fact. I think I generally hear that WW2 was a big booster of economic growth, so how long would it have taken without the war?
  - chipsy 11y ago
    A glib way of answering this is to look at how much of U.S. GDP went to military spending. It was extremely high during the war and has remained at a higher average level ever since - thus Eisenhower's "military-industrial complex" remarks at the end of his term. Minus that spending, it's not clear what would have happened, since we never had a return to the old status quo. The military investments of the war motivated the early development of Silicon Valley - thus, we'd be looking at a present day where "somewhere else" might have gained the tech hub crown. That said, the current moment is one where the premises could change again. China has a strong and growing influence in the world, just as the U.S. did coming into the Depression. The particular circumstances differ, but a broad "cycle of empire" is one way to interpret things.
    - hooo 11y ago
      Plus a lot of the world was destroyed outside of the US ... leading to the post war boom here.
    - hudj1jcnapru38 11y ago
      I think it's a great example of why it's important to try to not judge history. The complications in this one scenario are just so fascinating, yet it's important to resist trying to tie it up in a neat bow.
adventured 11y ago
As of the open today, ChiNext was down 41% in a month. As of right now, 90% of China's entire stock market is frozen. It's absolutely a 1929 style disaster. Were the authorities not stepping in constantly, the carnage would be far worse already - which is another way of saying, eventually it will get there no matter what they do. http://www.bloomberg.com/quote/SZ399006:IND http://www.bloomberg.com/quote/SZ399006:IND
- seanmcdirmid 11y ago
  The 10% limits on falls each day are horrible this way. It actually creates a continually falling market, we won't know how bad this crash really is for awhile.
  - laichzeit0 11y ago
    Do they also have limits on 10% rise each day?
    - adventured 11y ago
      Yes, stocks can only climb by 10% max per day. That led to some bizarre circumstances, where new IPOs during the upside mania were going up by the limit every day for weeks after the IPO.
    - seanmcdirmid 11y ago
      Yes, the blue chips that the government is pumping money into are bumping up against those limits also. Really really messed up.
azernik 11y ago
30% in less than a month, compared to 90% over 3 years. If you're comparing apples to apples (first few weeks of the American crash of 1929 to the current Chinese crash) the numbers look very similar.
- deleted 11y ago
  [deleted]
- simonh 11y ago
  The Chinese stock market hassufefred rampant manipulation to ramp it up, and is now correcting itself. Even with the steep drops so far it's still well up over the last 12 months, after all. All this means is that those rises were not justified and are being wound down. The government's panicked response isn't helping, and the fall may well be more severe than the economic realities justify, but what's new? There is no severe immediate risk of a depression in China. Their stock market is relatively very small compared to their economy as a whole and Chinese firms as a whole are nowhere near as dependent on it for raising capital as in western countries. Therefore the ammount of damage any fall in the stock market can do to the Chinese economy is fairly low. The Chinese leadership has staked a lot of it's credibility and prestige on the rises in the stock market, as evidence of it's good economic management. As a result they, and anyone wantign to curry favour with them, were hyping up the market and blowing air into the bubble as hard as they could. Bad mistake. They'll learn.
  - redwood 11y ago
    I hope you're right. But reading about firms that are raising loans with their stock as collateral. .. shall we say while staying true to your point are perhaps nevertheless even more exposed than your model's worst case. Only time will tell.
    - simonh 11y ago
      Sure, you're right to be concerned, it's no picnic. Some companies will go bust, and some investors will lose their shirts. It will hurt. It's not yet a systemic risk though. Of course the more the Chinese government panicks and tries to manipulate the market back up again, the worse it will get but right now it doesn't have to be all that bad.

by kvcc01 11y ago

backtoyoujim 11y ago

From the wikipedia page about the 1929 crash ... this part was very telling: "The market would not return to the peak closing of September 3, 1929 until November 23, 1954."

hudj1jcnapru38 11y ago
Also interesting to contemplate the influence of WW2 in that fact. I think I generally hear that WW2 was a big booster of economic growth, so how long would it have taken without the war?
- chipsy 11y ago
  A glib way of answering this is to look at how much of U.S. GDP went to military spending. It was extremely high during the war and has remained at a higher average level ever since - thus Eisenhower's "military-industrial complex" remarks at the end of his term. Minus that spending, it's not clear what would have happened, since we never had a return to the old status quo. The military investments of the war motivated the early development of Silicon Valley - thus, we'd be looking at a present day where "somewhere else" might have gained the tech hub crown. That said, the current moment is one where the premises could change again. China has a strong and growing influence in the world, just as the U.S. did coming into the Depression. The particular circumstances differ, but a broad "cycle of empire" is one way to interpret things.
  - hooo 11y ago
    Plus a lot of the world was destroyed outside of the US ... leading to the post war boom here.
  - hudj1jcnapru38 11y ago
    I think it's a great example of why it's important to try to not judge history. The complications in this one scenario are just so fascinating, yet it's important to resist trying to tie it up in a neat bow.

adventured 11y ago

As of the open today, ChiNext was down 41% in a month. As of right now, 90% of China's entire stock market is frozen. It's absolutely a 1929 style disaster. Were the authorities not stepping in constantly, the carnage would be far worse already - which is another way of saying, eventually it will get there no matter what they do. http://www.bloomberg.com/quote/SZ399006:IND http://www.bloomberg.com/quote/SZ399006:IND

seanmcdirmid 11y ago
The 10% limits on falls each day are horrible this way. It actually creates a continually falling market, we won't know how bad this crash really is for awhile.
- laichzeit0 11y ago
  Do they also have limits on 10% rise each day?
  - adventured 11y ago
    Yes, stocks can only climb by 10% max per day. That led to some bizarre circumstances, where new IPOs during the upside mania were going up by the limit every day for weeks after the IPO.
  - seanmcdirmid 11y ago
    Yes, the blue chips that the government is pumping money into are bumping up against those limits also. Really really messed up.

azernik 11y ago

30% in less than a month, compared to 90% over 3 years. If you're comparing apples to apples (first few weeks of the American crash of 1929 to the current Chinese crash) the numbers look very similar.

deleted 11y ago
[deleted]
simonh 11y ago
The Chinese stock market hassufefred rampant manipulation to ramp it up, and is now correcting itself. Even with the steep drops so far it's still well up over the last 12 months, after all. All this means is that those rises were not justified and are being wound down. The government's panicked response isn't helping, and the fall may well be more severe than the economic realities justify, but what's new? There is no severe immediate risk of a depression in China. Their stock market is relatively very small compared to their economy as a whole and Chinese firms as a whole are nowhere near as dependent on it for raising capital as in western countries. Therefore the ammount of damage any fall in the stock market can do to the Chinese economy is fairly low. The Chinese leadership has staked a lot of it's credibility and prestige on the rises in the stock market, as evidence of it's good economic management. As a result they, and anyone wantign to curry favour with them, were hyping up the market and blowing air into the bubble as hard as they could. Bad mistake. They'll learn.
- redwood 11y ago
  I hope you're right. But reading about firms that are raising loans with their stock as collateral. .. shall we say while staying true to your point are perhaps nevertheless even more exposed than your model's worst case. Only time will tell.
  - simonh 11y ago
    Sure, you're right to be concerned, it's no picnic. Some companies will go bust, and some investors will lose their shirts. It will hurt. It's not yet a systemic risk though. Of course the more the Chinese government panicks and tries to manipulate the market back up again, the worse it will get but right now it doesn't have to be all that bad.