Cause of the crash in stock market

1. Introduction 1.1 Black Monday The 1987 stock market crash stands out as one of the most remarkable financial events of the 20th century, perhaps since the emergence of our capitalist system several centuries ago. What makes it remarkable is: 1) The historic extent to which markets fell, an unprecedented 23%, and that they did so all over the world. 2) Its suddenness, how it appeared out of nowhere, and only took one day to play itself out. 3) Its complete lack …

…from the Asian official sector, and the adjustment in the U.S. dollar has been orderly. However, the demand for U.S. assets is not unlimited. Once those foreign countries, which can't stand the negative impact of continued weak dollar, start dumping US securities in the international market and looking for another currency as their foreign reserve. A sharp reduction, or a reversal, of capital inflows could entail serious consequences for currency and capital markets.