The finanacial crisis which took place in 2007-8 was named the finanacial crisis, but there have been many financial crises in the past. From as far back as the Roman times and previously to the present, companies have fallen, currencies have lost their value and the general financial position of countries have financially decreased. Many of these catastrophies have taken place, but what caused them and how can we learn from our past mistakes to prevent this from happening once again?
There are many types of financial crisis, but generally, a financial crisis is when financial assets such loans and deposits lose lots of their value. It can also be when the value of a currency drastically decreases, causing the country and its banks to become very poor. This has happened countless times before for many different reasons.
In Ancient Rome, in AD 33, a severe financial crisis came about as loans from the wealthy to the public became less abundant. Many important or influential figures would loan money to the public with interest. As the value of land and other things fell, people found it hard to pay back their money and many fell into debt, causing a crisis.
In the 17th century, in the Netherlands, tulips became extremely popular, with people paying vast sums of money to purchase them. Many speculators would buy tulip bulbs and then sell them for a higher price making lots of money. Houses, companies and estates were put on mortgage or even traded for new or rare varieties of tulip. Then, suddenly, in 1637, the tulip industry collapsed, and tulips went out of fashion. This meant that many tulip companies collapsed, speculators lost all their money and those who had put their property on mortgage or sold it were suddenly unable to pay back their debt. This was a huge financial crisis.
The credit crisis of 1772 started in England but quickkly spread to the whole of Europe. It was caused by the collapse of the bank Neal, James, Fordyce and Down. The bank collapsed when Alexander Fordyce fled to France to escape having to repay his debts or being charged for not repaying them. This meant that the public lost their trust in banks, meaning that less loans and credit was taken out. As London's economy mostly depended on credit and loans, this caused a huge financial crisis throughout Europe.
An example of a huge financial crisis is the Great Depression. After WW1, especially in America, tens of thousands of people lost their jobs, and the country's financial stability collapsed, America's GDP decreased drastically and their trade lost over half of what it was worth previously. It was thought to have been caused when stocks, shares and investments lost their value, and were bought and sold at very high prices. The stock market crash caused customers and consumers to lose their trust in the market and the loss of spending and speculation meant that many companies went out of business, slowed down their production and started firing workers. Even those still employed were paid very little and this lead to an increase in famine, unemployment and homelessness. This was arguably the largest and worst financial crisis in history.
A huge oil crisis in America and its allies took place in 1973, when the Organization of Arab Petroleum Exporting Countries refused to continue to sell oil to the USA, Canada, the UK, Japan, the Netherlands, Portugal, what was then Rhodesia and South Africa. The price of oil rose during the embargo from $3 to $12, which continued to affect gobal economy and politics for many years to come.
And, of course, there is the Financial Crisis. you would think that Britain and other countries would have learnt from previous crises and been sensible enough not to have another, but was it actually preventable? And how can we learn from our mistakes?
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