Historical evolution of financial and economic crises worldwide:

Historical evolution of financial and economic crises worldwide:

1. 1901: The Panic of 1901.
2. 1907: The Bankers Panic.
3. 1929: Crack of the 29 and Great Depression.
4. 1944: Bretton Woods Agreements.
5. 1971: End of the gold standard system.
6. 1973: Oil crisis.
7. 1979: Iranian Revolution.
8. 1980: Invasion of Iran by Iraq.
9. 1987: Black Monday.
10. 1994: Crisis of the Mexican peso.
11. 1997: Asian crisis.
12. 1998: Ruble crisis.
13. 2000: Dot-com crisis.
14. 2001: Attacks of September 11.
15. 2001 – 2002: Argentine Crisis.
16. 2007 – 2010: Great recession.
17. 2009 – 2010: Debt crisis in Europe.
18. 2010: currency war and global imbalances.

Development of the analysis of the World Crises

1901.- The panic of 1901. The first crash of the New York Stock Exchange was caused by a fight between E. H. Harriman, Jacob Schiff and J. P. Morgan / James J. Hill for the financial control of the North Pacific Railroad. The big bankers ended up coming to an agreement, but thousands of small investors went bankrupt.

1907.- The panic of the bankers. Several New York banks withdrew liquidity from the market. Depositors lost confidence in banks because there was no lender of last resort and due to lack of regulation. On this occasion, J. P. Morgan convinced several great bankers to keep the system afloat by injecting capital.

1929.- Crack of the 29th and Great Depression. The global economic crisis of the 1930s (Great Depression) was precipitated by the fall in the prices of agricultural products in the USA in 1928 and began with the collapse of the New York Stock Exchange on October 29, 1929. A Following the crisis, the basic legislation of the stock exchange was modified. One of the fundamental laws was the Securities Exchange Act of 1934 that created the American Securities Commission (SEC), to supervise and monitor the markets in the United States.

1944.- Bretton Woods Agreements. Towards the end of World War II, the international community holds a monetary and financial conference sponsored by the UN, from which came the Bretton Woods agreements (USA), which set the rules for commercial and financial relations between the most industrialized countries in the world. The World Bank (WB) and the International Monetary Fund (IMF) were also created, and the use of the dollar as an international reference currency spread.

1971.- End of the gold standard system. The excessive spending of the US on its investments abroad and the Vietnam War caused its gold reserves to be drastically reduced, thus the value of the currency was no longer supported by this metal. For this reason, amid heavy speculation and capital flight from the United States, President Richard Nixon decided to suspend convertibility with gold and devalued the currency by 10%, something he did without consulting the rest of the members of the System. International Monetary. Two years later, the currency was devalued again, finally ending the gold standard. Thus began the epoch of floating changes based on the evolution of capital markets.

1973.- Oil crisis. The cut in supply of the OPEC countries in the so-called first oil crisis during the Yom Kippur Arab-Israeli war, caused an increase in the price of crude oil from $ 2.50 to $ 11.50 in 1974. This raised the Western energy bill and caused a strong crisis in the most industrialized countries. From this price crisis, western countries initiate policies of diversification and energy saving and, among other defensive measures, the International Energy Agency (IEA) was created in 1974.

1979.- Iranian Revolution. The overthrow of the Shah and the establishment of the Islamic Republic in Iran caused the second oil crisis, and a new international collapse. Although this time the western economies were more prepared, since they had significantly reduced their consumption of crude oil, the drop in supply caused a long period of extraordinarily high prices. The crisis affected mainly developing countries, which, together with the price increase they had to pay for crude oil and inflation, had to face a cycle of financial crisis due to their high external debt.

1980.- Invasion of Iran by Iraq. At the end of the year, crude oil reaches new record prices, $ 40 a barrel. High prices led the West to produce more of its own oil in areas like the North Sea.

1987.- Black Monday. On October 19, 1987, millions of investors flocked to sell their shares on the New York Stock Exchange due to widespread belief in the inappropriate handling of confidential information and the acquisition of companies with money from credits. That day the Dow Jones Industrials Index plummeted 508 points (-22.6%), and dragged down the European and Japanese stock markets. Coordination in international monetary policy and on major economic issues is intensifying.

1994.- Crisis of the Mexican peso. The Mexican government is unable to maintain its fixed exchange rate against the dollar and announces the devaluation of the currency. Lack of confidence in its economy causes a large outflow of capital, credits are cut, production decreases and unemployment increases more than 60 percent. Its negative effects on the rest of Latin America were baptized as the “Tequila Effect”.

1997.- Asian crisis. In July the Thai currency was devalued, followed by those of Malaysia, Indonesia and the Philippines, which also had an impact on Taiwan, Hong Kong and South Korea. It dragged the rest of the economies and this crisis, which at first seemed regional, ended up becoming the first global crisis. The IMF developed a series of rescue packages to save the most affected economies and promoted structural reforms.

1998.- Ruble crisis. Russia collapsed its national banking system, with a partial suspension of international payments, the devaluation of its currency and the freezing of foreign currency deposits. The IMF granted multimillion-dollar loans to stop the free fall of its currency and that the impact was irreparable in the international market. It also urged its authorities to accelerate internal structural reforms to strengthen its financial system.

2000.- Dotcom crisis. The excesses of the new economy left a trail of bankruptcies, closings, purchases and mergers in the internet and telecommunications sector and a significant hole in the accounts of venture capital companies. On March 10, the Nasdaq’s main index, the highest exponent of the “new economy” and of the success of technology companies, closed at 5,048.62 points, its all-time high. In just three years, the crisis wiped almost 5,000 companies off the map and some of the largest telecommunications corporations were the protagonists of the biggest accounting scandals in history. The US Federal Reserve (Fed) responded with a half-point reduction in interest rates.

2001.- Attacks of 9/11. The attacks of September 11, 2001 in the US also brought down the bags. The Tokyo Nikkei fell more than 6% and European stocks fell sharply, leading investors to take refuge in gold and US Treasury bonds. The Fed responded with rate cuts – four to the end of the year – in the strongest campaign in its history.

2001-2002.- Argentine crisis. The Argentine government lacks funds to maintain the fixed parity of the peso with the dollar and imposes restrictions on the withdrawal of bank deposits (corralito) to avoid capital flight. In December 2001, it suspended the payment of the debt, of almost 100,000 million dollars, which constitutes the largest bankruptcy in history. In January 2002, President Eduardo Duhalde was forced to end parity and converted bank deposits into dollars into pesos.

2007-2010.- Great Recession. The United States suffers its biggest financial crisis since the 1930s, as a consequence of a relaxation in risk assessment, which is spread to the rest of the world. The trigger was the bursting of a huge housing bubble, which revealed that banks had extended junk mortgages (subprime) to people who couldn’t afford them, with the expectation that home prices would continue to rise. Those mortgages were securitized and sold in the markets, causing hundreds of billions of dollars in losses to investors. President George W. Bush created a $ 700 billion financial bailout program, which he and his successor, Barack Obama, used to revive banks, insurers and the auto industry. Obama also launched a $ 787 billion stimulus plan to revitalize the economy with infrastructure, education, unemployment benefits and subsidies for alternative energy. At the same time, Obama has been promoting the largest financial reform since the 1930s, complemented by an initiative to tighten banking rules internationally.

2009-2010.- Debt crisis in Europe. Greece’s new government acknowledges that the country’s deficit is much higher than previously revealed, causing its bond interest to skyrocket in the markets. The European Union and the IMF negotiate for months an aid program to avoid an extension of the crisis to other economies with similar problems, in particular Portugal, Spain, Ireland and Italy, although the fears in the markets sink the value of the euro.

2010.- Currency war and global imbalances. The US is renewing its pressure on China to allow the yuan to appreciate and boost domestic demand, while China, the European Union and other G20 members criticize the Fed’s injection of money for delving into global imbalances. Some industrialized countries criticize that some emerging economies intervene their currencies to make their exports more competitive, with the aim of accelerating their exit from the crisis. The Fed initiates an expansive monetary policy to stimulate recovery by injecting money into the system – the latter a $ 600 billion bond purchase program – that devalues ​​the dollar. The Brazilian Minister of Economy, Guido Mantenimiento, warns of the existence of a Currency War and attributes to China, the US and the EU the appreciation of the real and the creation of speculative capital flows. Japan steps into the currency market for the first time in six years to curb the yen’s steady appreciation against the dollar. Washington proposes at the G20 Finance Minister meeting in Gyeongju, South Korea to put numerical limits on imbalances in current account balances, something that most G20 members, such as Germany and Japan, reject. The issue becomes the focus of the G20 Summit in Seoul.

conclusion