Before we get to the drama of October 1987, here's a quick rewind:
The 1970s weren’t exactly a golden age of carefree spending. Oil crises, inflation, uncertainty; people learned to be cautious. You saved what you could, because you weren’t entirely sure what tomorrow would bring.
Fast forward a few years, and the mood had changed.
By the mid-80s, the clouds of the previous decade had lifted. Inflation was under control, economies were growing again, and a new political mood, led by figures like Ronald Reagan, encouraged businesses to expand, invest, and take risks.
Confidence didn’t return overnight. But once it did, it spread quickly from boardrooms to shopping malls to the stock market.
Suddenly, it felt like the world was opening up again. Money was being made. Opportunities were everywhere.
Remember my post about Credit Cards and Consumerism?
People weren’t just earning money; they were spending it. Borrowing became normal. Credit cards made it easy to have things now instead of later. And somewhere along the way, keeping up with the Joneses turned into competing with them.
And then, of course, there was the stock market.
Because I promised not to turn this into an economics lecture, let’s talk about something far more relatable.
Imagine Taylor Swift announces a tour. Tickets go on sale. At first, they’re expensive, but not unreasonable. People buy them because they want to go. But then something shifts.
Prices start rising on resale platforms. 150 becomes 300, and 300 becomes 800.
Suddenly, people aren’t buying tickets to attend the concert anymore. They’re buying them to sell later for a profit.
And as long as everyone believes prices will keep going up, the game continues.
Until… it doesn’t.
On what would become known as Black Monday, the Dow Jones Industrial Average fell by about 22% in a single day.
Not over months. Not over weeks, literally in hours.
It was as if all those hypothetical concert ticket holders woke up at the same time and thought:
“Maybe I should sell.”
If you’re picturing chaotic trading floors straight out of Wall Street (remember Gordon Gekko?), you’re not wrong.
But behind the shouting and hand signals, something new was happening.
Early computer-driven strategies were already in play; programs designed to sell automatically when prices started falling. Sensible in theory. Slightly problematic when suddenly, everyone feverishly logs on to resale platforms like StubHub or Ticketmaster, trying to get rid of their tickets at the same time.
Listings flood the market, prices start dropping, and in the background, automated pricing tools begin undercutting each other, making the fall even faster, as if the system itself is accelerating the panic.
Stock market crashes aren’t unique to the 80s, but 1987 stood out.
- It was sudden, shockingly fast
- It was global, markets fell everywhere
- And most surprisingly, it was temporary
If the 80s were all about confidence, then October 1987 was a short, sharp reality check.
It didn’t lead to years of misery like the Wall Street Crash of 1929, and it didn’t unravel the financial system like the Global Financial Crisis.
In 1987, the market fell and then, somewhat surprisingly, got back up again.
But it did leave a mark. Exchanges introduced “circuit breakers” to pause trading in freefalls, like hitting a reset button before things spiral too far.
Turns out the lesson wasn’t don’t be confident. It was: maybe don’t all panic at the exact same moment. Ha, easier said than done, right?
What happened later?
The 2000 dot-com crash was a gradual unwinding of overvalued tech stocks without systemic financial collapse. The 2008 crisis was fundamentally different. Rooted in excessive debt and housing finance, it triggered a global banking crisis and deep recession. Today’s markets are again highly interconnected and liquidity-driven, but the stress so far appears more concentrated in valuations and interest-rate sensitivity than in a broken banking system.
If you’re old enough to remember 1987, what do you remember about it? Did it feel as dramatic in real time as it looks in hindsight?
And for everyone else: do you think we’ve gotten better at handling hype and panic… or just faster at it?
I remember when people started to use credit cards with nothing but debt to back it up. I was thrilled when debit cards came into existence. Something that I think is horrible is home equity credit. Your major safety net is put at risk, and homelessness is no joke.
ReplyDeleteI was in language school in Guatemala at the time. I remember hearing about it on the news and wondering about what would happen, but I didn't know what it meant in terms of the economy. I was amazed that it happened. It seemed a bit... abrupt.
ReplyDeleteIn the UK, Black Monday seemed unimportant to anything but the stock market - it was over before most people knew about it. What was much more pressing was interest rates, high throughout the 80's reached an astonishing 17% by 1989
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