Economic crises

Examples of Economic crises in the following topics:

• Consequences of Banking Crises

  • Banking crises have a range of short-term and long-term repercussions, domestically and globally, that reduce economic output and growth.
  • Banking crises have a dramatic negative effect on the overall economy, often resulting in an eventual financial and economic crisis in a given economic system.
  • The most useful way to frame the consequences of bank crises is by observing the critical role banks play in economic growth, primarily through investment and lending.
  • With this in mind, a banking crises can have a variety of averse individual and economic consequences within the system.
  • The overall economic performance of any debt-dependent industries becomes less dependable, driving down consumer and investor confidence while reduce overall economic output.

• Recovery

  • The objective of economic recovery when in crisis is to stabilize the economy and recapture the value lost using economic stimulus strategies.
  • The objective of economic recovery when in crisis is to stabilize the economy, and from there recapture the value lost through economic stimulus strategies while addressing the factors which contributed to the collapse in the first place.
  • Understanding the inputs, and expected outcomes, is critical to understanding the economics behind reacting to economic crises (particularly from a Keynesian perspective).
  • The goal of investing or providing tax relief and subsidies for individuals and companies is to drive up purchasing behavior and offset the positive feedback loop attributed to economic crises.
  • This move saved the economic decline and restored consumer confidence through direct government intervention.

• Global Impacts

  • The 2007-2009 economic collapse was damaging not only to the U.S. but also global markets, driving the global economy into recession.
  • Modern markets are dependent upon one another across national borders, where global trends in economic growth and well-being will have a dramatic impact on national economic well-being and vice versa.
  • As a result, the 2007-2009 economic collapse had large effects not only at the origin (in the United States), but also on a global scale.
  • China has seen reductions towards the 7%-8% economic GDP growth (year on year), from clear double-digits in previous years.
  • There have also been a series of banking and financial regulatory changes across the world.These global safety nets and prevention policies are setting the tone for future strategies to avoid economic crises and minimize the prospective damage that occurs as a result of these unethical practices.

• Causes of Banking Crises

  • Banking crises can be caused by inadequate governmental oversight, bank runs, positive feedback loops in the market and contagion.
  • In light of recent market and banking failures, the economic analysis of banking crises both historically and presently is a constant source of interest and speculation.
  • Banking crises are not a new economic phenomenon, and similarly are not the only source of financial crises.
  • Regulatory Failure: One of the simplest ways in which bank crises can occur is a lack of governmental oversight.
  • In 2008, when the U.S. economy collapses, the reduced buying power and economic output from that economy dramatically damaged all economies dependent upon it (which includes most of the world).

• Introduction to Foreign Trade and Global Economic Policies

  • U.S. foreign trade and global economic policies have changed direction dramatically during the more than two centuries that the United States has been a country.
  • But since the Great Depression of the 1930s and World War II, the country generally has sought to reduce trade barriers and coordinate the world economic system.
  • This commitment to free trade has both economic and political roots; the United States increasingly has come to see open trade as a means not only of advancing its own economic interests but also as a key to building peaceful relations among nations.
  • Several financial crises, especially one that rocked Asia in the late 1990s, demonstrated the increased interdependence of global financial markets.
  • As the United States and other nations worked to develop tools for addressing or preventing such crises, they found themselves looking at reform ideas that would require increased international coordination and cooperation in the years ahead.

• The Global Economy

  • The IMF, to which the United States contributed 25 percent of an initial $8,800 million in capital, often requires chronic debtor nations to undertake economic reforms as a condition for receiving its short-term assistance.
  • Often, such problems arose not because of their overall economic management but because of narrower "structural" deficiencies in their economies.
  • The problem was compounded, they said, by the fact that in many of the Asian countries, banks were poorly supervised and often subject to pressures to lend to politically favored projects rather than to projects that held economic merit.
  • When growth started to falter, many of these projects proved not to be economically viable.
  • The IMF also acknowledged in the late 1990s that its traditional prescription for countries with acute balance-of-payments problems -- namely, austere fiscal and monetary policies -- may not always be appropriate for countries facing financial crises.

• Development Assistance

  • The World Bank receives its capital from member countries, which subscribe in proportion to their economic importance.
  • In the 1980s and 1990s, however, it took a broader approach to encouraging economic development, devoting a growing portion of its funds to education and training projects designed to build "human capital" and to efforts by countries to develop institutions that would support market economies.
  • Although assistance to nations with grave economic problems evolved slowly, the United States in April 1948 launched the Marshall Plan to spur European recovery from the war.
  • Increasingly, it emphasizes food and nutrition; population planning and health; education and human resources; specific economic development problems; famine and disaster relief assistance; and Food for Peace, a program that sells food and fiber on favorable credit terms to the poorest nations.
  • Proponents of American foreign assistance describe it as a tool to create new markets for American exporters, to prevent crises and advance democracy and prosperity.

• The Creation of the Federal Reserve

  • The US suffered through a number of financial crises that eventually drove Congress to create the US central bank, the Federal Reserve (the Fed), through the Federal Reserve Act of 1913.

• Normative and Positive Economics

  • Positive economics is defined as the "what is" of economics, while normative economics focuses on the "what ought to be".
  • Positive and normative economic thought are two specific branches of economic reasoning.
  • As a science, positive economics focuses on analyzing economic behavior.
  • Normative economics is a branch of economics that expresses value or normative judgments about economic fairness.
  • Positive economics does impact normative economics because it ranks economic policies or outcomes based on acceptability (normative economics).

• Behavioral Economics: Irrational Actions

  • Behavioral economics is the study of the effects of social, cognitive, and emotional factors on the economic decisions of individuals and institutions.
  • Behavioral economics focuses on the bounds of rationality of economic agents.
  • Behavioral economics focuses on the study of how and why individuals and institutions make economic decisions .
  • Behavioral economics was born out of the combination of economics and psychology.
  • Throughout its history, behavioral economics has studied the economic choices of individuals and institutions by analyzing psychology against economic research.