Financial crises are quite common in history and often cause economic tsunamis in affected economies. Let’s see some of the most-devastating Financial crises of all time.
The “Tequilazo” of Mexico
The “Tequilazo” consisted of a Crisis that Mexico suffered in 1994 caused by the lack of international reserves. This led to a sudden depreciation of the Mexican peso. International reserves are the money that countries use mainly, to fulfill international commitments (such as payment of foreign debt or trade).
Due to the currency depreciation, many companies had to fold. Many of the contracts that they held with suppliers were in dollars. Once this took place the debts increased dramatically.
US Treasury Secretary Robert Rubin had to deal with this huge financial crisis. Together with his secretary, Larry Summers, they created the $20 billion “rescue package” given by then-President Bill Clinton. They added another $30 billion of “international help” needed by Mexico to cushion the crisis.
The Bankruptcy of Lehman Brothers in 2008
On September 15, 2008, the US investment bank Lehman Brothers declared itself in bankruptcy. With a record debt of $ 613 billion, the collapse of the financial giant was followed by a total depletion of confidence in the bank system.
This became the worst international liquidity crisis ever and provoked the bursting of real estate bubbles throughout America, Iceland, Ireland and Spain.
As a result, bankruptcy became more prevalent than ever before. Many companies hastily implemented new measures in an effort to rescue their institution.
The Great Depression
The Great Depression began with the ” Wall Street Crash of 1929″, the most devastating stock market crash in the history the United States. The causes are still studied by historians and economists. Its affect spread across the entire planet.
On October 29, 1929, the New York Stock Exchange fell 11%. The fall continued for the next three days reaching 30% of its value. That day is known as Black Tuesday and is considered to be the beginning of the Great Depression. It is meant to represent the great financial loss of confidence in the economic system of the United States.
In the early years of the Great Depression, more than 9,000 banks collapsed, leaving more than 40 million people around the world without a savings account nor employment. This led to problems such as birth restriction and poverty.
Due to the United States’ position in the world economy, the crisis spread throughout the world, especially in the Latin American countries that based much of its economy on exports.
The Argentine Crisis
The decade of the 80’s was a very difficult period for this country. Dictatorship, The Malvinas War, the economic collapse along with massive inflation. Its debt grew throughout the 1990s amidst corruption. Argentina entered a great recession in 1999.
As a result, investors lost confidence in the companies operating there. This effect prompted the government to freeze bank accounts for a year, allowing them to withdraw money from them on rare occasions. Many saw this as a reason to have protest or to march. These huge disturbances led to the downfall of the government.
The Asian Crisis of 1997
On July 2, 1997, the serious financial crisis of the Asian countries began with the devaluation of the Thai currency. This began a period of financial hardship that gripped Asia.
What is the origin? Thailand grew excessively, acquiring a large foreign debt that led to the bankruptcy of the country. Add to this the serious growth in inflation and massive layoffs. The real estate and construction sectors were all affected. The currency depreciated by almost 50% causing a chain reaction in its neighboring countries. This contagious effect was rapid among the other Asian countries and significantly affected Indonesia and South Korea.
The post The Worst Financial Crises In History appeared first on .
