Black Friday

Black Friday Financial Market Crash Market Panic Gold Market 1869 Financial Debacle Economic Depression
Black Friday originally referred to September 24, 1869, when an attempt to corner the gold market led to a financial panic and depression. Today, it broadly denotes any significant drop in financial markets.
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Definition

Black Friday commonly refers to a sharp drop in financial markets. The term originated on September 24, 1869, when a group of financiers, including Jay Gould and James Fisk, attempted to corner the U.S. gold market, resulting in widespread panic and a subsequent depression. The term has since been used to describe any significant downturn or crisis in the financial markets.

Historical Context and Examples

Examples

  1. Original Black Friday (1869): The term was first used for the financial debacle on September 24, 1869, when Jay Gould and James Fisk attempted to control the price of gold. Their actions led to market panic and a severe drop in gold prices, causing a financial crisis.

  2. Panic of 1873: This event also began on a Friday and led to a severe economic depression, with numerous banks and businesses failing.

  3. Black Monday (1987): Although not named “Black Friday,” the stock market crash of October 19, 1987, shares characteristics with Black Friday events, noting a precipitous decline in market values.

Frequently Asked Questions

Q: What caused the original Black Friday in 1869? A: The original Black Friday was caused by an attempt by financiers Jay Gould and James Fisk to corner the U.S. gold market. Their actions caused a market panic and a severe drop in gold prices.

Q: Why do financial crises frequently occur on Fridays? A: Friday is significant because market activities on the last trading day of the week can often lead to heightened reactions, given that markets are closed for the next two days, leading to uncertainty.

Q: Are all significant market drops called Black Friday? A: No, not all market drops are referred to as Black Fridays. The term is typically reserved for historically significant crashes that lead to widespread panic and economic consequences.

  • Market Panic: A sudden, extensive decline in financial markets as investors quickly sell off assets in a reaction to a triggering event.

  • Economic Depression: A prolonged period of significant decline in economic activity across an economy, lasting longer than a recession.

  • Gold Market: A financial market in which gold is bought and sold, impacting both spot and futures prices.

  • Financial Market Crash: A rapid and often unanticipated drop in the stock or other financial markets.

  • Recession: A temporary period of economic decline during which trade and industrial activity are reduced.

Online Resources

  1. Investopedia’s Guide to Market Crashes: Investopedia

  2. Historical Financial Panics and Crashes: The Balance

  3. Economic History: Economic History Association

Suggested Books for Further Studies

  1. Manias, Panics, and Crashes: A History of Financial Crises by Charles Kindleberger and Robert Aliber
  2. Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor
  3. When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein

Fundamentals of Black Friday: Finance Basics Quiz

### What significant event does the term "Black Friday" originally refer to? - [x] The attempt to corner the U.S. gold market in 1869. - [ ] The stock market crash of 1929. - [ ] The panic of 1873. - [ ] The Black Monday event in 1987. > **Explanation:** The term "Black Friday" originally refers to the financial debacle on September 24, 1869, caused by an attempt to corner the U.S. gold market. ### Who were the financiers behind the original Black Friday? - [x] Jay Gould and James Fisk - [ ] Warren Buffett and Charlie Munger - [ ] Alan Greenspan and Ben Bernanke - [ ] John D. Rockefeller and J.P. Morgan > **Explanation:** The original Black Friday was caused by an attempt to corner the U.S. gold market by financiers Jay Gould and James Fisk. ### How did the original Black Friday impact the economy? - [ ] It caused a temporary economic boost. - [x] It led to a business panic and a subsequent depression. - [ ] It had no significant impact on the economy. - [ ] It resulted in increased gold prices. > **Explanation:** The original Black Friday led to a business panic and a subsequent depression after the attempted gold market cornering failed. ### Why is the term "Black Friday" significant in financial history? - [ ] It marks the day of the highest stock market gain. - [x] It denotes significant financial market crashes. - [ ] It is the start of the financial year. - [ ] It signifies a holiday sale period. > **Explanation:** The term "Black Friday" is significant because it denotes historically significant market crashes leading to widespread economic consequences. ### Which other financial crisis is notably associated with a Friday? - [x] The panic of 1873 - [ ] The dot-com bubble burst - [ ] The housing market crash of 2008 - [ ] The Black Monday event of 1987 > **Explanation:** The panic of 1873 also began on a Friday and led to severe economic downturns. ### What is generally referred to by a "financial panic"? - [x] A sudden, extensive decline in financial markets. - [ ] A brief moment of market variability. - [ ] A long-term economic recovery. - [ ] Government intervention in markets. > **Explanation:** A financial panic refers to a sudden, extensive decline in financial markets as investors quickly sell off assets in response to negative events. ### Can a modern-day market crash be called a Black Friday? - [x] Yes, if it occurs on a Friday and has a significant impact. - [ ] No, only historical crashes are termed Black Fridays. - [ ] it always pertains to significant market gains. - [ ] it must involve the automobile market. > **Explanation:** A modern-day market crash can be called a Black Friday if it occurs on a Friday and has a significant financial impact. ### What market was central to the original Black Friday? - [ ] Stock Market - [x] Gold Market - [ ] Real Estate Market - [ ] Commodity Market > **Explanation:** The gold market was central to the original Black Friday, where financiers attempted to corner it. ### What distinguishes an economic depression from a recession? - [ ] A depression is shorter. - [ ] A depression sees minimal unemployment rates. - [x] A depression is a more prolonged and severe economic decline. - [ ] A depression is followed by immediate recovery. > **Explanation:** An economic depression is more prolonged and severe compared to a recession. ### Why was the failure to control the gold market significant in 1869? - [x] It led to market panic and economic downturn. - [ ] It had no effect on the economic condition. - [ ] It stabilize the market prices. - [ ] It improved investor confidence immediately. > **Explanation:** The failure to control the gold market significantly led to market panic and subsequent economic downturns.

Thank you for exploring the nuances and historical context of Black Friday in financial markets. Continue to enhance your understanding of financial history and market mechanisms!

Wednesday, August 7, 2024
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