Many reputable publications are already calling the current crisis the most severe since the Great Depression, Ukr.Media reports.
Experts from different countries predict rising unemployment, falling living standards and a rollback of the global economy several years ago. This crisis has not yet manifested itself in full force, but it has already managed to scare the world. And before it there were no less serious financial crises, and today we will talk about the largest upheavals in the history of mankind.
Credit crisis of 1772
By 1772, the British Empire owned many colonies, including 13 colonies in North America, which in a few years would declare their independence and become the United States. At that time, London was the center of the world, including the financial one. Due to the increasing accumulation of wealth supplied from America and the East Indies, Great Britain was actively developing, including through the issuance of credit funds. But on June 8, 1772, perhaps the first international financial crisis began, and all because of one person. The fact is that Alexander Fordyce, a partner in the banking house of Neil, James, Fordyce and Down in London, lost 300 thousand pounds sterling on shares of the East India Company and on June 8 fled to France, trying to escape from paying debts.
Since the printed press was actively developing at that time, this news quickly spread throughout London, and then throughout Great Britain and Europe. Many depositors panicked that their money could also sink, and immediately ran to withdraw their deposits. And since the credit system of that time was based on people's trust in banks, the financial market literally completely collapsed. By the end of June, twenty important banks had gone bankrupt and stopped paying money. The banks that remained afloat were in a very deplorable state.
As the press of those years noted, no event in the last half century had hit trade and the credit system so hard. Not only Great Britain suffered, but also the Netherlands, as a major player in the East Indies, Sweden and other European countries.
By the way, some experts link the financial crisis of 1772 to the Boston Tea Party and the riots that followed in the 13 colonies, which grew into the American Revolution and the struggle for independence.
Great Depression
This crisis is well known in the West, because it swept like a destructive wave throughout the capitalist world, not only affecting the socialist countries. Beginning with the crash of the Wall Street financial exchange in 1929, the depression lasted 10 years and ended only in 1939 with the outbreak of World War II. The crisis was most acute in the period from 1929 to 1933, when the peak of unemployment in the United States alone reached almost 25 percent. In some other countries, it rose to 33%.
The Great Depression began with an “orgy of mad speculation,” as then-President Hoover called it in 1927, referring to the U.S. stock market. He meant that even then, American stock markets had become detached from reality and were trading stocks at ever-increasing prices, while business activity was declining due to a crisis of overproduction.
And then came Black Tuesday and Black Thursday, when markets opened sharply lower, wiping out tens of billions of dollars in market capitalization. A market panic began, fueled by misguided U.S. policy decisions, such as a 40 percent import tax designed to protect the American market from goods from Europe, which was recovering from World War I.
Massive unemployment led to famine, millions of people died, countries lost 16% of their national product, and world GDP fell by about 10%. Incidentally, the German banking crisis of 1931 followed, which led to an even greater deterioration of the situation in the Weimar Republic and ultimately to the rise to power of the Nazi regime in January 1933.
Oil overproduction in the 1980s
In 1973, the oil crisis began when OPEC countries announced the cessation of oil supplies to countries that supported Israel in the Yom Kippur War. At that time, prices increased fourfold. Then in 1979, due to the Islamic revolution in Iran and the abolition of state regulation of oil prices in the United States, panic began on the stock exchanges, and the price increased again.
Due to high prices, interest in purchasing oil decreased, which led to overproduction of hydrocarbons in the main exporting countries. As a result, due to the decline in economic activity in Western countries, as well as due to the increase in interest in energy-saving technologies, by 1986 the price of oil fell from 35 dollars per barrel to 10.
Some countries benefited from this, such as the United States and Western European countries, but OPEC countries, as well as the USSR and other oil-producing countries, whose exports were heavily dependent on oil, suffered seriously. Mexico, Venezuela and Nigeria almost went bankrupt. The crisis led to much more serious consequences, such as the Persian Gulf War, when Iraq invaded Kuwait to replenish resources depleted by the war with Iran. A severe economic crisis began in the USSR, because a significant share of the country's exports had been hydrocarbons up to that point. This led not only to economic but also to political collapse, which became one of the main reasons for the collapse of the Soviet Union.
Asian financial crisis
The 1990s saw the rapid growth of the so-called Asian tiger economies—South Korea, Singapore, Hong Kong, and Taiwan—and huge amounts of foreign capital pouring into them. Investors were also interested in other Asian countries, but much of this capital flowed in as speculative capital. This led to over-optimistic views of the Asian tiger economies and excessive credit expansion and excessive debt accumulation in these countries.
Thailand was the first candidate for bankruptcy, due to the fact that the ratio of GDP to the volume of external credit was clearly not in favor of the former. In May 1997, the Thai baht came under massive attacks from international speculators, and on June 30, the government was forced to abandon the fixed exchange rate against the US dollar, which it had maintained before, citing a lack of foreign currency resources.
This caused panic in Asian stock markets and an outflow of foreign investment. In addition to the outflow of investment, the panic was exacerbated by the possibility of bankruptcy of the Asian tigers and other East Asian countries.
The consequences were serious. For example, the Asian financial crisis led to the declaration of independence of East Timor from Indonesia, a significant drop in the exchange rates of national currencies and stock indices of Asian countries, the ruin of large corporations and popular unrest. Experts believe that the 1997 crisis had a direct impact on the economic crisis in Russia that followed in 1998.
Financial crisis of 2007-2008
The beginning of this global economic crisis, which, according to some experts, continues to this day, was laid back in 2006, when the number of home sales in the United States decreased. The standard segment of the US mortgage market was already overheated by that time, and then banks began to lend to people with low incomes and bad credit histories. In the spring of 2007, the subprime mortgage crisis began due to a number of factors, including the lack of repayments of loan funds by high-risk clients. This was followed by a second wave of the mortgage crisis, which spread to the standard segment, where loans issued by banks are refinanced by state mortgage corporations.
The subprime mortgage bubble burst and led to a series of failures of major banks, including Lehman Brothers, Merrill Lynch, Goldman Sachs, Morgan Stanley, and other respected credit institutions. The bursting of the subprime mortgage bubble, coupled with the stock market crash following the bankruptcy of Lehman Brothers, was the impetus for a global economic crisis in which countries began to dump foreign assets.
This caused a outflow of money not only from developing countries but also from developed ones. As a result, the unemployment rate reached 199 million by 2009, the poor and middle class lost a significant amount of money, and the richest 1% of the world's people concentrated 50% of all money in their hands.
And even in October 2018, 10 years later, the IMF noted that the effects of the crisis still persist, slowing economic growth. Most of the world's economies have not managed to return to pre-crisis GDP growth.
