Financial Crises And The Economic Crisis

2055 Words9 Pages
Introduction Financial crises are fundamentally, periods of economic turmoil. This essay is an analysis of the underlying economic scenario in three specific financial crises that have occurred, since the Wall Street crash of 1929. It goes on to explain its impact on global trade and the lessons that G20 governments can learn from them. Synopsis of the problem The focus of this essay is the Global financial recession of 2008 (also termed as the Great Crash), Mexican crises of 1994 ( famously called the Tequila crises) and the Asian crises of 1997. It’s an attempt to understand and analyse the different impacts that the financial crises have had on international trade. The Great Crash of 2008 was caused by a bubble burst of sub-prime mortgages in America, which resulted in a crash of the US housing market. This domestic economic crisis quickly transformed into a global recession and spread economic devastation worldwide. During this period world trade and foreign manufacturing bore the steepest fall since the Great Depression. During the Mexican crises (1994) despite increases in interest rates and fall in foreign investments the government tried to support the peso with dollar reserves. However, due to excessive depletion of the dollar reserve, the peso was devalued which caused a major bank run resulting in a financial crises. The Asian crises of 1997 were triggered by Thailand as they gave up the fixed exchange rate regime, leading to a major currency crisis. The
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