There have been many financial crises that have made significant damage to economies. Some of those crises still live on today as the consequences of some actions still are felt in many countries and economies. The three crises that will be examined will be the Dot-Com Bubble, the Great Recession in the United States and the Greek Crisis. A detailed analysis will be given of each crisis including a comparison of the different events.
The first crisis to be examined will be the Dot-Com crisis. This crisis occurred from 1997 to 2000, with the effects of its aftermath being felt until 20021. The country that it affected was just the United States. This crisis was caused by the bubble growth of Dot-Com companies. Dot-Com companies were businesses that were experimenting in the wave of the internet world. During this period Dot-Com companies or companies that wanted to join this surge, would add an “e-“at the beginning of their business or a “.com” to be a part of this movement1. This Dot-Com movement ended up having soaring stock prices for companies that joined this movement. Another cause was the free spending of these Dot-Com companies. Company’s believed that their survival was dependent on expanding its customer base slowly. In turn, companies disregarded annual losses that would soon hurt them significantly1. The resolution for this crisis was the stock market taking a substantial loss. A lot of these companies could not recover from this economic collapse so they had to file bankruptcy. A lot of these companies also were bought out. Although this crisis hurt the stock market, it was the businesses that suffered. No government intervention was needed luckily to solve this crisis.
The second crisis was the Great Recession in the United States. Signs of the recession were evident in 2007, but the United States would not enter this recession until 20082. The United States is currently still recovering from this recession and will continue to recover for a while. The United States recession affected the United States the most. It has caused substantial economic impacts and losses. However, since the United States is such a powerful country, this crisis has affected many other countries around the world. To sum it up, any country that conducted business with the United States was affected by this crisis. There were many different causes for this crisis. The first was the Securization Food Chain of mortgages2. This means that financial conglomerates, investment banks and insurance firms were linked together in the trading of mortgage derivatives and other derivatives. With this monopoly of firms, loans were being sold and traded to make huge profits. This would increase home prices tremendously. The second cause was that this monopoly of firms was letting people who could not afford homes, afford them. They would finance anyone with the implication that home prices would raise. They would also finance mortgages with adjustable interest rates which would cause homeowners not to be able to afford their homes in the long run. Another contributing cause was the offshoring of American jobs. Businesses were trying to save money by offshoring jobs which in the end contributed to a higher unemployment rate. The fourth contributing factor was the allotment of unemployment rate to control inflation. As the unemployment rate raised so did inflation causing economic failure. Lastly, mergers between large companies were allowed. These mergers reduced tax revenues for large companies and cut employment of employees thus contributing to unemployment as well2. All these causes produced the biggest economic collapse for the United States since the Great Depression. The resolution ended up with government intervention and regulation. This resulted in a bailout for all the companies affected by investing in the mortgage market. This bailout has helped push the United States economy to start recovering. However it is important to note that the
Issues in Management MSc International Business Financial Crises, slumps and booms, causes and effects, history and future Jihad Al Naddaf ID: 1258826 What are the causes of the booms and slumps in the financial system? What are the factors that will influence how long it is before the next cycle begins? INTRODUCTION: The global financial system had been through a lot of booms and slumps through history, some lasted for few years, some for decades; some had a minor effect, some had a…
Regarding Latin America, to what extent the current financial crisis is different from the previous crises? In September of 2008, a feeling of ‘there we go again’ hit Latin American countries (LACs), as it became clear that ‘decoupling’ would not work and that the US subprime crisis would spill over the rest of the world economy. In a region where ‘normality’ had been much more the exception and periods of either crisis or crisis adjustment have been the rule in the last three decades, the interruption…
Table of Contents Argentina financial crises 2 Thailand Financial Crises 3 Indonesia Financial Crises 6 Malaysian Financial Crises 7 Pakistan Economy 8 Argentina financial crises: Following are the indicators and effects of Argentina financial crises from 1995-2005: Year Economic growth: the rate of change of real GDP Inflation: percent change in the Consumer Price Index Exchange rate: local currency units per U.S. dollar Trade balance as percent of GDP Annual growth in money supply…
sense that it is a loan that is secured by a money market instrument of the same or larger dollar value. Thus if a borrower defaults on a loan, the lender keeps the collateral usually a short term treasury security. a. In the wake of the financial crises of 2007-2009 US banks significantly decreased their lending due to both the tightening of their credit standards and the lower demand for loans in a recessionary economic environment and they increased their cash holdings. Banks in the united…
Journal of Business Communication http://job.sagepub.com/ Economic Crises and Financial Disasters: The Role of Business Communication Daphne A. Jameson Journal of Business Communication 2009 46: 499 originally published online 17 June 2009 DOI: 10.1177/0021943609338667 The online version of this article can be found at: http://job.sagepub.com/content/46/4/499 Published by: http://www.sagepublications.com On behalf of: Association for Business Communication Additional services…
The capitalist world has recently been confounded by major banking crises and economics recessions. Such events have occurred both frequently and regularly in the past and, during a visit to the London School of Economics in 2008, Her Majesty the Queen expressed surprise that no-one had foreseen these problems before they occurred. The German Philosopher, Hegel, would have been less taken aback, however: he asserted that the only lesson of history is that people never learn lessons from history.…
analysis of the cause of financial crisis and how to avoid In September 2008, the collapsed of the fourth-largest securities firms in U.S., Lehman Brothers', like a storm that made financial crisis quickly spread across the United States and even the whole world (Besar et al 2011). Unlike the past, the background of outbreak of this economic crisis is that the capitalism had developed to the stage of monopoly-finance capital( Foster 2007) . The characteristic of the financial crisis is that people…
John Gallop EH101 13/3/15 (Group 11 Franz Zobl) Does historical experience suggest that financial crises are the result of weak economic fundamentals or self-fulfilling panics? A financial crisis is ‘a disturbance to financial markets – associated with falling asset prices and insolvency, which spreads through the financial system, disrupting the market’s capacity to allocate capital.’1 Nearly all crises feature both weak fundamentals of some sort and a period of panic. If a fundamental becomes…
different perspectives. Vassilikopoulou, Lepetsos, Siomkos, and Kalliopi (2009) considered the crisis caused by an operational deficiency in a products life cycle. In addition, Vassilikopoulou et al. (2009) characterized crises as low probability events that lead to negative financial implications and pose the most threat to companies. Lei, Dawar, and Gürhan-Canli (2012) recognized events as the crisis only if they resulted in consumer’s reaction or damage. Therefore, the crisis leads to lack of consumer’s…