Throughout the history and even today we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis?
There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market ...view middle of the document...
This crisis is considered by many economists to be the worst financial crisis since the Great Depression. This crisis was called the worst because it was spreading really quickly all around the world.
But what causes this kind of crisis to happen? There a lot of causes that bring financial crisis. Financial crisis often happens because of the mistakes that people or firms make. For example: if investors expect bank to fail, the bank will fail; when a financial institution (or an individual) only invests its own money, it can, in the very worst case, lose its own money. But when it borrows in order to invest more, it can potentially earn more from its investment, but it can also lose more than all it has.
But the one thing that people are always afraid of is the consequences of the financial crisis. Financial crisis can be contagious, it can spread from one bank to another, or from one country to another, causing a global financial crisis that is harder to get out of. Also in a country where we have a financial crisis we have a recession and unemployment too. So every country should get out of the financial crisis as soon as possible. Because if this crisis continues it can bring a big depression in the country and a lot of people will be unemployed and some will lose their home.
There a lot of causes and consequences that financial crisis brings. But the one question that the economists ask them self is “Can we stop the financial crisis from happening?”. On that question we still don’t have a solution. So the financial crisis will still continue to happen, and the one thing we can do is to try to prevent it from happening or to find a solution on how to get out of it.