4 Financial Crises of Twenty-First Century
The twenty-first century has proved time and time to be nearly as economically volatile as the twentieth century, when the global economy was undergoing technological transition. During this time as recorded in many best finance publications, several financial meltdowns occurred, affecting countries, territories, and, in the case of the Economic Downturn, the entire financial system. Each economic collapse has a different story to tell, and each one teaches us something new.
Argentine Economic Crisis
Argentina’s economy has also been riddled by catastrophes ever since the Great Financial Panic attacked Argentina’s economy in the year 1876. The region witnessed the first ever economic emergency of the 21st era. The crisis occurred and lasted from 2001 to 2002, and it included a liquidity crisis as well as economic distress also documented in many best finance publications. The Argentine peso is in shambles as a result of a failed physical cash peg to the US dollar. The Argentine peso is in disarray following a failed physical cash peg to the US dollar. When the Argentine government considered freezing bank deposits, bank customers became concerned, causing interest rates to rise.
During that time, Domingo Cavallo, Minister of Economy, imposed a restriction on cash deposits on December 1, 2001. Family members had their investments or savings seized, and inflation reached an all-time high of 5,000 %.
The International Monetary Fund (IMF) declared the other week it could not provide assistance to Argentina because the nation was generally considered a sequential debtor. Five International officials didn’t even believe that appropriate transformations would actually occur.
The nation had to go through Financial and Currency Crisis:
Argentina’s government ended up losing direct exposure to investment marketplaces, as did residential Argentine banking institutions. So, several businesses had been forced to close. During late 1990s, the Argentine financial sector was praised for its accelerated regulatory frameworks, but this did not prevent the devastation of the 2001–2002 collapse. Through 2002, the default rate among lending institutions had got approximately 60%.
However, with the nation’s economy desperately trying to survive and uncertainty about the federal government’s stability, capital investment managed to flee the country. As a result, investors swapped peso-denominated financial investments for foreign assets, causing the Argentine peso to depreciate. Many best finance publications also mentioned about this crisis.
Global Financial Crisis
The global financial crisis of 2007–2009, largely regarded as the worst global financial downturn since the Great Recession, began in the United States and expanded to the majority of the advanced economic regions. Much of it has been documented about the origin and reason or cause of the Global Depression. However, the key story revolves around large investment banks that overextended themselves with mortgage-backed securities (MBSs).
The bank’s MBS instruments’ profit and costs had all been based on rising property prices prompted by an untenable property bubble in the US housing industry. Falling home prices triggered a domino effect of failures by bond issuers throughout the nation, beginning with subprime mortgages and expanding to the whole MBS market.
The global economy became increasingly intertwined in the 1990s and early 2000s, which was bad news for international investment banks. Trash equities infiltrated Japanese and European investor portfolios, aided by adjustable-rate mortgages (ARMs), with many of them receiving AAA ratings from Moody’s and Standard & Poor’s.
The crisis’s initial stages began at the end of 2007, reaching a peak in September 2008. Several international investment financial institutions have been impacted. There were multiple bank lapses in Europe, such as the Royal Bank of Scotland, which also lost $34 billion in 2008. One of the worst recessions in the United States began in late 2008 and early 2009, and yet it ended up taking several months for anxiety to spread to Europe. Greece, Ireland, and Portugal were badly affected.
The effect of the financial meltdown was limited to the United States and Europe. According to the World Bank, global GDP, which measures total goods and services produced across all regions, fell to -1.67 %in 2009 from 1.85% in 2008.
Russian Financial Crisis
The Russian economy, did lead by Vladimir Putin, expanded significantly throughout beginning of the twenty-first century, kudos in huge section to a flourishing energy industry and increasing worldwide commodity prices. The Russian economy had become so reliant on energy supplies that oil and natural gas sales accounted for nearly half of the country’s revenue.
However, world oil prices plummeted in June 2014. In just 6 months, the average price of a barrel of oil has fallen by 40% from its previous high of $100. The drop below $100 was notable because that was the figure Russian officials estimated was needed to keep the country’s budget stable.
Putin amplified the energy crisis by infiltrating and occupying Crimea from Ukraine, prompting US and European financial sanctions. Goldman Sachs and other major financial institutions began withholding capital and cash from Russia. Russian banks suffered catastrophic losses as a result of the government’s combative monetary expansion.
As a consequence, the United States, Europe, and other countries placed restrictions, including a prohibition on purchasing Western technology to develop oil. Another set of sanctions barred Russian banks from obtaining capital from Europe or the United States.
Global Financial Crisis as a Result of the Covid-19 Outbreak
The COVID-19 economic downturn is a pandemic-caused global financial slowdown. In almost all countries, the downturn began in February 2020. The COVID-19 lockdowns and other preventative measures executed in early 2020 pushed the global economy into emergency mode, following a year of global economic downturn marked by stagnant economic growth and financial activity. Within a few months, every developed economy could have experienced a downturn.
According to the report mentioned in many best finance publications, the 2020 stock market collapse, which could see main economic indicators drop 20 to 30 %, it could be considered as the first big indication of economic downturn. During the economic downturn, many countries saw abnormally high and immediate rises in unemployment. In the United States, over 10 million cases of unemployment have already been documented. The United Nations (UN) predicted that global underemployment would eliminate 6.7 % of working hours in the second half of 2020, similar to 195 million full-time workers, through April 2020. Unemployment was predicted to be around 10% in some areas, with higher rates in countries that were severely impacted by the covid-19 outbreak.
Lower oil prices, lower tourism, lower hospitality, lower energy, and lower consumer activity resulted from the economic downturn and subsequent 2020 Russia–Saudi Arabia oil price war. This was exacerbated by Russia’s response to the intensification of the Russo-Ukrainian War, which culminated in Russia’s invasion of Ukraine in 2022. The 2022 stock market crash is a current market downturn that began on January 3rd of that year. The vast majority of major indices have lost between 10% and 30% of their value.