Category: Finance
Black Monday
On October 19, 1987 stock markets around the world crashed, a global financial crisis which started from Hong Kong and was spread to Europe and the United States as well. It came be to known as the Black Monday. Wall Street went mad. The Dow Jones Industrial Average fell 508 points (22%) to 1738.74, a $500 billion decrease in value which is still the biggest one-day loss in the history of the index. S&P 500 also dropped 57.64 points (20.4%) to 225.06. There have been numerous reasons as to why this massive drop happened. Although many blame...
Dow Jones Industrial Average
The Dow Jones Industrial Average(DJIA), often simply referred to as the “Dow Jones”, is one of the market average indices, which measures the price-weighted average of the 30 large publicly owned companies traded on the New York Stock Exchange. The index, illustrating how big industrial companies are performing in general, was first found by Charles Dow, founder of Wall Street Journal, in 1896. A statistician named Edward Jones helped him along the way, which clarifies the name “Dow-Jones”. At first, it only included 12 companies, of which many do not exist today. The only original company which has saved...
Moral Hazard
Support for bad banks also raises the specter of what economists call moral hazard. If bankers know that the central bank will lend cheaply when liquidity runs dry, they needn’t take care to avoid crises in the first place. In 1873, The Economist’s editor-inchief Walter Bagehot described the danger this way: If the banks are bad, they will certainly continue bad and will probably become worse if the Government sustains and encourages them. The cardinal maxim is, that any aid to a present bad Bank is the surest mode of preventing the establishment of a future good Bank. Mastering ‘Metrics...