There has been much loose talk comparing the stock market’s Black Monday of October 19, 1987, with the market’s Black Monday and Tuesday of October 28 and 29, 1929. The comparison is valid and interesting with respect to the market itself. Both episodes witnessed panic selling, record percentage declines in market averages, and record volumes of trading. The comparison is false and misleading with respect to the real economy—especially in terms of the fears being expressed that because the 1929 market crash was followed by the Great Depression, the 1987 crash also presages a Great Depression.
That conclusion reflects an erroneous understanding of the actual effect of the 1929 market crash on the Great Depression.
Comments