The Biggest Financial Crises

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Thu, 04 Jun 2020

The biggest financial crises

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The financial crisis has rocked the economy of the world for the past two centuries. It is quite common nowadays and has affected the major economies of the world. The following is a description of some of the most devastating financial crises of the 20th century.

1. The Great Depression (1929 - 1939)

This was the numero uno when it comes to the financial disaster of the 20th century. This depression lasted for 10 years and caused huge income losses, increased unemployment rates, and loss of production in the industrial sectors. There is a belief that the crashing of Wall Street in 1929 was the root cause of the American Great Depression. This coupled with the poor policy decisions made by the United States government resulted in the economic crisis to get deeper.

2. 1973 OPEC Oil Crisis

The OPEC (Organization of the Petroleum Exporting Countries) that mainly comprises of Arab nations did not like the United States sending arms supplies to Israel during the Arab-Israeli war. They decided to revolt against this and declared an oil ban on the US and its allies. As a result, the oil prices shot up like anything due to shortages in the US and US along with other developed countries faced a financial crisis.

3. The Suez Crisis

The Suez Canal Company was nationalized by Egypt on July 26, 1956. This did not go well with the United Kingdom, France, and Israel. Joint military action was planned by these 3 nations and Israel invaded Sinai on October 29, 1956. It lasted for two months and resulted in the eruption of the financial crisis. The four nations had to seek IMF monetary assistance to stem the economy tide and they faced some political repercussions. This resulted in the Suez Canal to be closed for 6 months that led to delay in deliveries and cost increases. 

4. 1979 Oil Crisis

This could be termed as the second oil crisis of the 20th century. This time, the disaster happened due to the decrease in oil production due to the Iranian Revolution. The global oil supply only decreased by about 4%, but the panic this revolution created resulted in the oil price rise. It doubled over the next 12 months and once the Iran-Iraq war started in 1980, the oil supply from Iran was almost stopped. This lead to major developed countries, including the US, facing an economic recession. The oil prices were at higher levels for the first half of the 80s.

5. The International Debt Crisis

This crisis started on August 20, 1982. This is a decade-long financial crisis faced by developing countries in Latin America and Europe. It started with Mexico not able to repay its loan and as time went by it started to spread to over 20 countries. Poland informed the debtors of its non-availability of funds to pay off its debts in March 1981. The crisis deepened and spread to other neighbouring countries like Hungary, Russia, and Yugoslavia looking for payment reschedules. At the same time, the monetary shrinkage in the US helped the dollar to see an appreciation. With the appreciation in the dollar, many Eastern European and Latin American countries felt the pinch, as they had to make their repayments in US dollars.

6. East Asian Economy Crisis

Many of the East Asian economies saw a looming crisis to develop in 1997. Most of these countries were on economic growth for a decade and this crisis took them off-guard. The sudden worsening of the East Asian economies was attributed to factors like wide swing exchange rates against the US dollar, increased stock market prices, boosted property values, and huge external shortages.

7. Latin American Debt Crisis

Latin America and economic crisis go hand in hand. In its 200-year-old history, Latin America has seen the economy stoop to new lows for over 4 to 5 times. 20th century was not free from the debt crisis either. Latin America saw different crises happening to different countries and nations in the 20th century. The Brazilian economic crisis started in 1999 and lasted until 2003. The major crisis that Mexico saw was in 1982 and the Tequila crisis of 1994-95 shocked Latin America.

8. Black Monday in 1987

On October 19, 1987, the US stock market crashed heavily and it affected the global financial market. The Dow Jones fell 508 points and the Black Monday crash was witnessed in the futures and options markets. The percentage of fall was 22.6% and this was the largest single-day percentage fall for the Dow Jones index.

9. Russian Flu of 1998

The Russian economy crunch or Ruble crisis showed its ugly face on 17 August 1998. This happened when the Russian Central bank and the government devalued Ruble currency. This crisis not only had a bad impact on Russia, but also on some of its neighboring countries. The Russian flu was attributed to financial discipline from the Government and the people.  

10. Japanese asset price bubble burst

The real estate market in Japan was booming from 1986 to 1991 and kept the Japanese economy inflated. The real estate price bubble burst in 1992 owing to an unprecedented huge increase in asset prices, frenzied credit extension and cash supply. The asset prices took a sharp fall by late 1991 and the Japanese economy had to bear its major brunt for more than a decade.  

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In Conclusion

It is very easy for the economic crisis to sprout up for any nation and country if things are not controlled. Once it surfaces, suppressing the crisis is not easy. It can take more than a decade to rectify the poor state of the economy.