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“Wall Street Lays an Egg,” a headline in Variety announced in October 1929. In that understated sentence the show-business newspaper was saying that the New York stock market had collapsed. Beginning on October 24—remembered as Black Thursday—and culminating in an even blacker Tuesday, October 29, the value of securities dropped more than 26 billion dollars. Before the end of November 1929 the nationwide loss exceeded 100 billion dollars. Over the next few years the nation, and the rest of the world, slowly sank into the Great Depression.

The crash of 1929 was never far from the minds of those who had experienced it. Although governmental safeguards had been erected, there was always the fear that a crash could happen again. On Monday, Oct. 19, 1987, it did. The 1987 stock market collapse, a fall of 508 points in the Dow Jones industrial average, cut the value of securities by more than half a trillion dollars. The total decline for October 1987 was 769 points. Although the point and dollar drops were far larger than those of 1929, the loss in terms of percentage of the market was smaller.

A few days after the crash of 1987, the journalist James J. Kilpatrick told his readers: “Those of us who know nothing about the stock market will never understand it. That puts us right in the same class with economists and brokers who know all about the stock market.” He was not exaggerating. The stock market—or, more broadly, the securities industry—is far more complex than the markets for products and services. The stock market has been called the paper economy because it deals in money, certificates of ownership, and certificates of debt. The business of the market is the buying and selling of both types of certificates, normally called stocks and bonds. What complicates the market are all the devices that have been introduced into what was originally a simple business transaction. This article deals only with the most general features of the market.