The Crash: Panic Grips The Globe

A crisis spotlights Washington's failures

  • Share
  • Read Later

First came a vague foreboding, a kind of free-floating anxiety. The U.S., said worriers, could not go on forever spending more than it would tax itself to pay for, buying more overseas than it could earn from foreign sales, and borrowing more abroad than it could easily repay. There had to be a day of reckoning, and it could unhinge the whole world economy. But when might it come? What form would it take? How bad might it be? No one could say, and so the forebodings could be pushed to the back of the mind.

But then, slowly at first, the anxiety began to take on a shape that could be sensed if not exactly foreseen. On all the world's stock exchanges, prices had leaped up too far, too fast, to be sustained. The mood in the markets shifted from fantasy about instant wealth to nervousness about an inevitable "correction" (a wonderful euphemism). By Monday morning the concern was no longer vague but had taken on physical form -- piles of papers littering brokers' desks, each representing a hastily scribbled order to sell stock; rows of numbers flashing on computer screens, bringing news of alarming price breaks in all the early-opening markets: Tokyo, Hong Kong, London, Paris, Zurich . . .

Then trading began in New York, and the unimaginable happened: a collapse on a scale never seen before -- no, not even in 1929. Prices went down, down, down, swiftly wiping out an entire year's spectacular gains. "I just can't believe that this is happening," moaned one trader, as he took nonstop sell orders at Donaldson, Lufkin & Jenrette. At lunchtime, brokers across the U.S. went hungry or ate sandwiches at their desks while trying to keep phone receivers pressed to both ears. "This is going to make '29 look like a kiddie party," shouted a trader on the Los Angeles floor of the Pacific Stock Exchange.

Almost an entire nation become paralyzed with curiosity and concern. Crowds gathered to watch the electronic tickers in brokers' offices or stare at television monitors through plate-glass windows. In downtown Boston, police ordered a Fidelity Investments branch to turn off its ticker because a throng of nervous investors had spilled out onto Congress Street and was blocking traffic. George Finch, 66, a retired businessman in San Francisco, summed up the bewilderment: "I don't know what the hell is going on."

By the time the 4 p.m. closing bell rang at the New York Stock Exchange on what instantly became known as Black Monday, the Dow Jones industrial average had plunged 508 points, or an incredible 22.6%, to close for the day at 1738.74. Some $500 billion in paper value, a sum equal to the entire gross national product of France, vanished into thin air. Volume on the New York exchange topped 600 million shares, nearly doubling the all-time record. Brokers could find only one word to describe the rout, an old word long gone out of fashion but resurrected because no other would do: panic. The frenzy rose as it spread once again around the globe. On Tuesday stock prices fell by 12.2% in London, 15% in Tokyo, 6% in Paris and 6.7% in Toronto, on top of huge losses Monday.

  1. Previous Page
  2. 1
  3. 2
  4. 3
  5. 4
  6. 5
  7. 6
  8. 7
  9. 8
  10. 9
  11. 10
  12. 11