What is a financial collapse?

Financial collapse occurs when the economy suffers from traumatic shock or a number of artificial shocks that cause massive disruption of normal economic activity, resulting in deep and negative consequences for almost all participants in the economy. Normal market relations, deflation or hyperinflation, very serious unemployment or collapse of assets in certain sectors may break down. Such a collapse will generally lead to years of economic recession or depression and serious problems. There is no consensus about what causes or prevents such collapse, and while economists have created different theories to explain these events, the differences between crisis events make the task of developing a single theory of economic crisis very difficult.

In a normal and healthy economy, most workers are employed, inflation is present, but modest, the price of assets has been predicted over time and markets efficiently connect buyers and sellers. When a part of this system fails, the entire structure of the Kapit may beListice economies stop and financial collapse may occur. Unemployment deprives the market for products for products, hyperinflation or deflation harms the ability of buyers and sellers to each other through the market and so on.

historically, financial systems have collapsed for many different reasons. The Roman Empire suffered from a very serious financial collapse, from which the western half of the empire has never been recovered, mainly due to poor economic planning, ruthless depreciation of currency and hyperinflation. This collapse was so serious that the cash economy has basically ceased to operate in the West for centuries.

Financial shocks related to currency prices, excessive use, close economic development and uncontrollable speculation caused great damage to the world's 1920s. These financial shocks, combined with ineffective government reactions, led to the periodMassive unemployment, deflation and general collapse of normal functioning of market structures in most of the world. In the United States, this financial collapse has led to years of anemic growth, while in Germany it contributed to social and political events that destroyed the Republic of Weimar.

Theory of the origin of these financial disasters varies greatly. The gross consensus among mild economists claims that they tend to result from remedial failures in the basic capitalist economic model, such as incorrect supervision of markets and banks or unsuccessful monetary policy. Other economists, especially market fundamentalists of the Austrian school, claim that the presence of any regulation in the system causes these shocks to disturb market mechanisms. Economists on the left generally argue that financial collapse is the result of an EIV economy that claims to damage the functioning of markets, or even, in the case of Marx economists, from the very nature of the capitalist system.