History of World Crises |
Is the world facing a new financial crisis or not? In 2020, almost more than half of analysts predict it. Their arguments: the US stock market is overheated, stocks are overvalued, and the world is overproduction. The US external debt is growing unreasonably, the supply of oil exceeds demand, the level of world GDP growth has slowed down – all these are the harbingers of a new crisis. And partly there is logic here. The economy develops according to the Elliott Wave Theory. Every growth is followed by a decline. The pandemic also made its contribution, dramatically slowing down production and severing economic ties. True, the crisis was also predicted last year after the long trade wars between the United States and China. So is there an economic downturn ahead? For this it is worth looking back at the history of world crises.
Wave theory of economic crises
- The Great Depression, 1929… Scientific and technological progress has played a cruel joke on the world economy. The active development of technology resulted in an imbalance between production volumes and purchasing power. Wages remained small, workers worked for a penny, and it was they who were the main force driving the economies of countries forward. There are several reasons for the crisis:
- Overproduction. As many goods were produced as people could not consume. At some point, companies were forced to fix losses, after which the economies of the countries went down.
- Lack of regulation. The unmanaged stock market, pushed by swindlers and speculators, formed a bubble that sooner or later had to burst.
- Lack of money supply. At that time, the US, which started the crisis, was using the gold standard. On the eve of the crisis, real estate rose in price, the conveyor was mastered, and the number of speculative transactions increased. But to provide all this money supply was not enough, just as there was not enough gold.
The history of world crises shows that one step is enough for an economy to collapse like a domino. Due to overproduction, producers lowered prices (deflation), unemployment increased, demand fell, and a wave of bankruptcies began.
- Oil Crisis, 1973… It has geopolitical roots. OPEC countries refused to supply oil to Great Britain, Canada, Japan and the Netherlands, which supported Israel during the conflict with Syria and Egypt. Having reduced production, the countries of the cartel thereby artificially inflated oil prices by 4 times, which immediately hit the cost of many goods. Unemployment, inflation, falling demand. The crisis revealed structural problems – the dependence of the economies of countries on oil and the policies of the countries producing it.
- Black Monday, 1987. The fall in US stock indices was more than 20%. The reasons were not named so. One of the versions assumes its inevitability – a recession should have come, but no one expected such an instant collapse. Another version is the inconsistency of the monetary policy of countries G. The third is the inflation of a bubble due to operations with derivatives and algorithmic trading.
The economic recession of 1997 in Asia and the collapse of the dot-coms in the United States in 2002 could also be added to the history of world crises, but these had more local consequences than global ones.
- 2008 mortgage crisis… It turned out to be not as painful as the previous ones – many companies recovered after 1-2 years. True, some went bankrupt. The reason for this is classic – inflation of the bubble. Banks were actively distributing mortgage loans, not caring about the welfare of borrowers. Under the pools formed from loan agreements with the right to claim loans, they attracted financing from investment funds. Then the money was again allowed to issue new loans. And so in a circle. When it turned out that there was no one to pay on loans, real estate depreciated sharply, investment funds and banks went to the bottom, followed by the entire stock market.
The world has been living without major economic disasters for 12 years. Analysts are trying to name a date for the next start of the collapse, but so far they have failed. It is difficult to say when the next recession will start and what will be its catalyst. After all, even the pandemic has not yet been able to have a significant impact. But still he will certainly be. And you can make money on this!