What is the financial crisis?

From an economic point of view, the financial crisis is a situation where extended assets suddenly lose value. This may occur as a result of various internal and external influences and, like the massive earthquake, it takes years of rambling before a large crisis. The financial crisis often leads to recessions that are consecutive neighborhoods of negative growth in gross domestic product or GDP.

Despite the global financial crisis that develops at the beginning of the 21st century, the term and its consequences are still not understood. This type of crisis has been part of the economy with different results for centuries. An example of this type of incident is the Holland tulip mania of the 17th century, the Australian banking crisis of 1893 and the impact of Wall Street and the great depression of the 30 years. The ability to survive and rebuild after a financial crisis depended on many different types of factors, including the outbreak of war, changing market and new economic regulations.

One joint financial crisis is known as bubble . To this economic oxymoroneIt occurs when stock prices are driven so high through speculation that it is completely disproportionate to buy more, because it will never bring in maturity, what was originally paid. When the market reaches this "disproportionate" horizon, there is generally a huge sale of shares, leading to an astronomical decrease in value.

The bank crisis occurs when investors pull out money from financial institutions too quickly to keep the bank step. Since most modern banks give the money they accept, it means that the bank may not be able to return money to investors' accounts if too much pulled out. Without banking insurance, people can lose all money in their accounts, fear of getting more and more investors to pull out money. If the bank is worried about it may not have enough capital to cover investments, it may be restrained to borrow any, which may lead to a widerThe financial crisis is to prevent loan approval.

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global economy is often vulnerable to the currency crisis that occurs when a rapid devaluation in a currency of one region, which makes it too unstable to set exchange rates. If the region has a fixed exchange rate, it can use money reserves to create a difference in value. This practice can, in turn, lead to sovereign failure, where the country can no longer afford to repay the difference it owes and any amount it has borrowed from foreign partners.

One of the common factors in many financial crisis situations is the idea of ​​growing panic or mentality of the herd. In the bubble economy, investors of the ovarian are purchased by buying more and more shares, sending the price and expectations they shoot. In the banking run, what starts with several investors who pull out money who can play concerns about banking run, leading more and more people to destabilize the bank for fear of destabilizing. In manyCases, after impact, financial experts are struggling with many questions about why the crisis has been unforeseen or ignored, but it may take years of context and distance before getting a clear picture of the situation.