Anatomy of a Wall Street crash

In 1990 Wall Street fell 20% in 10 weeks beginning in the middle of July. This was caused by Iraq's invasion of Kuwait and fears it could exert monopoly control over oil supplies in the Middle East. Fears an October stock market crash like 1929 would turn into another depression proved misplaced. Indeed, there was not even a recession as the economy continued to grow at rates between 3% and 4% per annum, without reaching capacity constraints, while inflation remained steady at around 5% a year as did interest rates at around 7.5%. Against this favourable background the stock market rose b...