From the Great Depression to the Great Recession, here’s a look back at some of the biggest dips in the global economy
The crashes of the past century have had a variety of causes—from drops in worldwide commodity prices to pandemic-induced panic (Getty Images/Virojt Changyencham)
1933: THE GREAT DEPRESSION
On October 29, 1929, also known as Black Friday, the Toronto Stock Exchange crash signaled Canada’s watershed moment in the Great Depression. One in five Canadians would become dependent on government relief as the world marched towards a global war.
Cause:Widespread drops in world commodity prices and sudden declines in economic demand and credit.
Solution:In 1934, Prime Minister R.B. Bennett passed the Bank of Canada Act in order to centralize the fragmented banking system to regulate credit and currency in the public’s interest. And, like in the U.S., the Second World War helped bolster the country’s economy by increasing government spending and employment rates.
- Between 1929 and 1939, the Gross National Product of Canada dropped 40%
- Unemployment at 27%
- Canadian exports shrank by 50% (1929-1933)
- GDP (at market prices) - $6,009 (1930) to $4,975 (1932) = 18.83% drop
1982: EARLY 1980s RECESSION
The decade kicked off with MTV, the advent of personal computers and the most severe recession in Canada since the 1950s.
Cause:The fallout of the 1979 oil crisis which caused a spike in oil prices due to the Iranian Revolution.
Solution:By hiking interest rates, the central bank encouraged recession and job loss to fight inflation.
- Inflation: Food up 11.4% and Consumer goods up 12.8%
- Unemployment went from 7.6% (1981) to 11% (1982) and 12% (1983)
- GDP dropped 3.2% (1982)
2008: THE GREAT RECESSION
A financial crisis so widespread and impactful that even Hollywood told the tale in The Big Short. Its origins could be traced to the bursting of the U.S. housing bubble in 2008, lasting until 2009.
Cause:Sub-prime lending in deregulated banking sectors, mainly in the U.S.
Solution:The government introduced Canada’s Economic Action Plan that pumped more than $63 billion in fiscal stimulus, encouraging growth and boosting jobs.
- Inflation: Food prices up 8%
- Consumer Price Index: Down 0.9%
- Commodity Price Index: $391.92 (monthly BCPI) down from $881.31
- Unemployment = 6.14% (2008) to 8.34% (2009)
- GDP dropped 2.93% in 2009
2020: PANDEMIC
According to the C.D. Howe Institute, the COVID-19 induced recession lasted from March 2020 until 2021, making it the shortest — but deepest — recession since the Great Depression.
Cause:Global pandemic causing the closure of businesses worldwide.
Solution:While still technically in a recovery phase, an initiative that has helped is the digitalization of certain jobs leading to a teleworker boom from February to May 2020, from 16.6% to 32.6%.
- S&P/TSX Composite Index had its biggest single day drop since 1940 (12.34%)
- Unemployment up 3.8%
- Canada GDP at $1.645 billion (down 5.54% from previous year)
STAYING THE COURSE IN TURBULENT TIMES
Learn more aboutwhat a recession really is, andhow to invest in a volatile market. Find out how tostay ahead of debtandbankruptcy, and check out CPA Canada's extensivefinancial literacy resources.
FAQs
Marking the beginning of the Great Depression, the Wall Street Crash of 1929 is perhaps the most infamous stock market crash in history. After a decade of economic prosperity and speculative investment in the stock market, the bubble burst in October 1929, wiping out billions of dollars in wealth.
What was the response to the financial crisis? ›
In response, the Federal Reserve provided liquidity and support through a range of programs motivated by a desire to improve the functioning of financial markets and institutions, and thereby limit the harm to the US economy.
What was the biggest financial crisis in history? ›
The Great Depression lasted from 1929 to 1939 and was the worst economic downturn in history.
How much money was lost on Black Tuesday? ›
On October 29, 1929, "Black Tuesday" hit Wall Street as investors traded some 16 million shares on the New York Stock Exchange in a single day. Around $14 billion of stock value was lost, wiping out thousands of investors.
Will the US stock market crash in 2024? ›
Stocks are up 8.8% in 2024 through May 7, as measured by the S&P 500, but markets have cooled and the large-cap index is down 1.3% in the second quarter. Some investors are inching toward the sidelines amid worrisome economic news: slowing economic growth, a softening labor market and rising core inflation.
Which market crash was the worst? ›
On October 24, 2008, many of the world's stock exchanges experienced the worst declines in their history, with drops of around 10% in most indices.
What really caused the financial crisis? ›
Increased borrowing by banks and investors
Borrowing money to purchase an asset (known as an increase in leverage) magnifies potential profits but also magnifies potential losses. As a result, when house prices began to fall, banks and investors incurred large losses because they had borrowed so much.
How was the financial crisis solved? ›
In February 2009, under new President Barack Obama, Congress passed the $789 billion American Recovery and Reinvestment Act, which helped bring about an end to the economic recession. The stimulus package included $212 billion in tax cuts and $311 billion in infrastructure, education and health care initiatives.
What was the impact of the financial crisis in the USA? ›
From the beginning of the recession in December 2007 to its official end in June 2009, real gross domestic product (GDP)—i.e., GDP as adjusted for inflation or deflation—declined by 4.3 percent, and unemployment increased from 5 percent to 9.5 percent, peaking at 10 percent in October 2009.
What was the biggest economic shock in history? ›
The Great Depression of 1929–39
Encyclopædia Britannica, Inc. This was the worst financial and economic disaster of the 20th century. Many believe that the Great Depression was triggered by the Wall Street crash of 1929 and later exacerbated by the poor policy decisions of the U.S. government.
Note: The distinction between developed and developing countries is based on the updated M49 classification of May 2022. Data for 2024 is a forecast. UN Trade and Development (UNCTAD) forecasts global economic growth to slow to 2.6% in 2024, just above the 2.5% threshold commonly associated with a recession.
When was the financial crisis at its worst? ›
The 2007–2008 financial crisis, or the global financial crisis (GFC), was the most severe worldwide economic crisis since the Great Depression.
Who profited from the 1929 crash? ›
Several individuals who bet against or “shorted” the market became rich or richer. Percy Rockefeller, William Danforth, and Joseph P. Kennedy made millions shorting stocks at this time. They saw opportunity in what most saw as misfortune.
How long did it take for the stock market to recover after 1929? ›
Wall Street Crash of 1929
The crash lasted until 1932, resulting in the Great Depression, a time in which stocks lost nearly 90% of their value. The Dow didn't fully recover until November 1954.
Why was Black Thursday so devastating? ›
Many investors—both institutional and individual—had borrowed or leveraged heavily to buy stocks, and the crash that began on Black Thursday wiped them out financially, leading to widespread bank failures. That, in turn, became the catalyst that sent the United States into the Great Depression of the 1930s.
What was the fastest market crash in history? ›
The Dutch Tulip Bulb Market Bubble, also known as Tulipmania took place in 1637. Oct. 19, 1987, also known as Black Monday, marked the largest one-day stock market decline in history. The 2020 Coronavirus Stock Market Crash lasted several months.
What was the worst market day in history? ›
Some sources (including the file Highlights/Lowlights of The Dow on the Dow Jones website) show a loss of −24.39% (from 71.42 to 54.00) on December 12, 1914, placing that day atop the list of largest percentage losses.
How big was the market crash in 2008? ›
It was among the five worst financial crises the world had experienced and led to a loss of more than $2 trillion from the global economy. U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 (~$14.6 trillion in 2023) trillion.
Does the stock market crash every 7 years? ›
Since 1900, the market has had a pattern of crashing every seven to eight years, according to Morningstar and Investopedia.
The crashes of the past century have had a variety of causes—from drops in worldwide commodity prices to pandemic-induced panic (Getty Images/Virojt Changyencham)
