Wall Street Bombing 1920

  “[It was] an unexpected, death-dealing bolt, which in a twinkling turned into a shamble the busiest corner of America’s financial center. […] Almost in front of the steps leading up to the Morgan bank was the mutilated body of a man. Other bodies, most of them silent in death, lay nearby. As I gazed horrorstruck at the sight, one of these forms, half-naked and seared with burns, started to rise. It struggled, then toppled and fell lifeless to the gutter.” George Weston, an Associated Press reporter, described what he had witnessed from the protection of a doorway.    ...

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...

Milton Friedman

  Milton Friedman was born in New York in 1912. As a kid, he showed great enthusiasm to study mathematics and wanted to become an insurance actuary. While in college, he developed an interest in economics and therefore pursued graduate studies in economics in University of Chicago and later got his Ph.D. from Columbia University.     In 1967 he became president of the American Economic Association. It was also during this period that Friedman became an adviser to President Richard Nixon. In 1976, he won the Nobel Prize in economics for his achievements in the field of consumption function...

Mark Twain Effect

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”   The Above mentioned quote is adopted from Mark Twain’s Pudd’nhead Wilson book. The phenomenon “October Effect” in stock markets has gotten its name from this very excerpt. The effect, observed in some markets, talks about the general low returns of stocks in October. Proponents of this idea usually refer to the time of the three stock market failures of the past decade. Let’s have a look at these crises:   Crisis Date...