Major Market Crises of History: Reason and Effect
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There are many market crises that happened over the last 150 years, three of the major ones are discussed in the presentation which are: 1929 Wall Street Crash 2000 Dot-Com Bubble 2008 Global Financial Crisis
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The document summarizes the global financial crisis that began in 2007 and its causes and consequences. It was triggered by losses in the US subprime mortgage market and the bankruptcy of Lehman Brothers. The crisis spread due to securitization of risky mortgages and moral hazard. This led to job losses, bankruptcies, declining consumption and aversion to risk. Governments responded with bank bailouts and stimulus spending while regulators aimed to reduce conflicts of interest and better oversee financial markets.
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Global Financial crisis 2008
The 2008 Global Financial Crisis was caused by a rise and fall in housing prices, loose monetary policy by the Fed that fueled risky lending, and the collapse of major investment banks due to their leveraged positions. It led to a recession characterized by falling home values, high unemployment, declining manufacturing and automotive industries, and financial losses for colleges. However, some developing countries were less impacted. The crisis also contributed to a shift in global power towards countries like China, India, and Brazil. Governments responded by reducing interest rates, increasing spending on infrastructure, lowering taxes and boosting transfer payments, and establishing funds to provide companies with access to capital.
2007 2009 financial crisis
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The global financial crisis, brewing for a while, really started to show its effects in the middle of 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems.
On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world. The problem could have been avoided, if ideologues supporting the current economics models weren’t so vocal, influential and inconsiderate of others’ viewpoints and concerns.
This presentation provides an overview of the crisis with links for further, more detailed, coverage at the end.
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Financial crisis _2008
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2. As housing prices declined and subprime borrowers began to default, the value of these securities plummeted. This caused the failure of banks and other financial institutions highly exposed to subprime mortgages.
3. The crisis had ripple effects across borders, with investments devalued and economies impacted around the world. Governments enacted massive bailouts to stabilize the financial system and prevent a global economic depression.
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The document discusses several financial crises including the 1980s debt crisis, the 1997-98 Asian crisis, and the current subprime crisis. It analyzes the causes and impacts of these crises from an international political economy perspective. The document also examines historical patterns of economic regimes emerging after financial crises and questions whether the current crisis may lead to a new economic regime.
Global Financial Crisis 2008
The document provides an overview of the global financial crisis of 2008. It discusses several key points:
- The US housing market boom from 2002-2006 led to a housing price bubble that eventually burst, contributing to the crisis. As housing prices declined sharply from their 2006 peak, foreclosures and defaults increased substantially.
- Loose monetary policy by the US Federal Reserve from 2002-2004, keeping interest rates low, fueled risky lending and the housing bubble. When rates rose in 2005-2006, the default rate on adjustable mortgages skyrocketed.
- Highly leveraged investment banks collapsed in 2008 as default rates rose due to declining lending standards. Stock prices around the world plummeted nearly 40
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This article discusses the 2008 global economic crisis and its effects in Lithuania. It describes how Lithuania experienced rapid economic growth before the crisis, with GDP increasing 10.3% in some years. However, the country was unprepared for the crisis. When it hit in 2008, Lithuania's GDP declined sharply by about 15%. Like other Baltic states, Lithuania faced issues like production decreases, unemployment, inflation, and lower foreign investment. The government took some steps that lacked responsibility, like austerity measures that reduced incomes and consumer demand, weakening the domestic market further. Reviving Lithuania's economy required restoring population incomes and consumer demand.
Global Economic Crisis
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Global financial crisis 2008
1. The 2008 financial crisis was caused by the bursting of the housing bubble in the U.S., also known as the subprime mortgage crisis.
2. Subprime lending involves giving loans to borrowers who may have difficulty maintaining repayments, and are characterized by higher interest rates and poorer terms.
3. The crisis occurred due to a relaxation in lending regulations, poor creditworthiness of borrowers, rising housing prices, and borrowers' inability to pay their mortgages, leading to failures of major banks and financial institutions.
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Economic Outlook: The document begins by examining the global economic outlook for 2023, including an analysis of major economies, emerging markets, and key indicators influencing investment trends. It delves into macroeconomic factors such as GDP growth, inflation rates, interest rates, and fiscal policies, offering a foundation for understanding the broader economic environment.
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2. As housing prices declined and subprime borrowers began to default, the value of these securities plummeted. This caused the failure of banks and other financial institutions highly exposed to subprime mortgages.
3. The crisis had ripple effects across borders, with investments devalued and economies impacted around the world. Governments enacted massive bailouts to stabilize the financial system and prevent a global economic depression.
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- Loose monetary policy by the US Federal Reserve from 2002-2004, keeping interest rates low, fueled risky lending and the housing bubble. When rates rose in 2005-2006, the default rate on adjustable mortgages skyrocketed.
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1. The 2008 financial crisis was caused by the bursting of the housing bubble in the U.S., also known as the subprime mortgage crisis.
2. Subprime lending involves giving loans to borrowers who may have difficulty maintaining repayments, and are characterized by higher interest rates and poorer terms.
3. The crisis occurred due to a relaxation in lending regulations, poor creditworthiness of borrowers, rising housing prices, and borrowers' inability to pay their mortgages, leading to failures of major banks and financial institutions.
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Introduction:
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Key Topics Covered:
Economic Outlook: The document begins by examining the global economic outlook for 2023, including an analysis of major economies, emerging markets, and key indicators influencing investment trends. It delves into macroeconomic factors such as GDP growth, inflation rates, interest rates, and fiscal policies, offering a foundation for understanding the broader economic environment.
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Sustainable Investing: Given the growing importance of environmental, social, and governance (ESG) considerations, this section explores the concept of sustainable investing and its impact on investment decision-making in 2023. It discusses the integration of ESG factors into investment analysis and explores sustainable investment opportunities across various asset classes.
Technological Advancements: Technology continues to reshape the investment landscape, and this section examines key technological advancements expected to impact investing in 2023. It covers topics such as artificial intelligence, blockchain, robo-advisors, and digital currencies, providing insights into how these innovations are transforming traditional investment practices.
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The dot-com bubble occurred from 1999 to 2000 as stock prices for many new internet companies rose dramatically before collapsing in 2001. Venture capital flooded into internet startups during this period, fueling abnormal stock price increases. When the bubble burst in 2001, many internet companies went bankrupt and unemployment in the IT sector rose sharply. The collapse exacerbated an economic recession in both the US and Japan. While some internet companies like Amazon and eBay survived, the bubble and its bursting had widespread negative economic impacts.
The Global Depression and Gulf Economies
Ibrahim M. Oweiss, Professor of Economics at the Georgetown University School of Foreign Service in Qatar, gave a CIRS Monthly Dialogue lecture on the subject of “Current Economic Global Depression: Causes and Effects With Reference to the Gulf Economies.”
Financial crises, Causes and consequences
Financial crises can begin due to credit and asset price booms and busts or increases in uncertainty. This can lead to banking crises as balance sheets deteriorate and panics ensue as depositors withdraw funds. Debt deflation can then occur as the value of assets falls relative to liabilities. The 2007-2009 crisis was caused by financial innovation enabling subprime lending, agency problems in mortgage markets, and asymmetric information exacerbated by credit rating agencies. The effects included a collapse in the US housing market, deterioration of financial institution balance sheets, a run on the shadow banking system, turmoil in global financial markets, and the failure of major financial firms.
SubPrime Crisis
The document summarizes the subprime mortgage crisis and its global impacts. It began with loose lending practices in the US that led to a housing bubble. When housing prices declined and borrowers defaulted, it sparked a financial crisis as risky loans were bundled into securities that spread the risks throughout the global financial system. Major banks and financial institutions collapsed. Credit tightened globally and stock markets plunged significantly. The crisis also impacted economies worldwide through tightening credit, falling markets, and reduced trade and business activity. While government interventions helped stabilize markets, full recovery will take time as the financial systems remain fragile.
After the storm 27 aug 2010
After the global financial crisis, the global banking industry will undergo significant changes due to new regulations. Growth and profitability for banks will likely decline as equity ratios increase. Lean years are ahead for US banks as revenue growth may remain low due to reduced lending. Private equity experienced booms and busts with the economic cycle, riding high during expansions but seeing deal volumes drop sharply during recessions. The industry is starting to see signs of recovery in 2010 in both developed and emerging markets like India.
Causes of 2009 financial crisis in us
The US housing bubble began in the late 1990s fueled by low interest rates, an expansion of subprime lending, and speculation. By 2006, housing prices collapsed as supply increased and interest rates rose. Mortgage loans were repackaged and sold globally through complex financial instruments, spreading risk but also multiplying problems. When housing prices declined, defaults increased threatening financial stability. The US government implemented a $700 billion bailout plan under both Presidents Bush and Obama to inject capital into banks and support the financial system.
Financial Crisis of 2008
This document discusses the subprime mortgage crisis and the crash of Lehman Brothers. It provides background on how the US economy emerged over the centuries and discusses key events like the creation of the Federal Reserve in 1913. It then explains how the subprime mortgage crisis began, with low interest rates in the early 2000s leading to a housing bubble. When interest rates rose and housing prices fell, many subprime borrowers defaulted on their loans. This caused losses for banks and investment firms like Lehman Brothers, which collapsed into bankruptcy in September 2008 and helped trigger a global financial crisis.
Financial crisis and Its Effects on Security Markets.pptx
The document discusses various financial crises throughout history including their causes and effects. It provides details on the Great Depression of the 1920s, the OPEC oil crisis of the 1970s, the dot-com bubble of 2000, and the 2008 global financial crisis. It notes that the Great Depression resulted in a 25% unemployment rate in the US and an 80% drop in stock market values. The OPEC crisis quadrupled oil prices between 1973-1974. The document also outlines signs of financial bubbles like rising unemployment and inflation, declining housing sales, and sustained stock market losses.
Week12b
The document discusses the dotcom bubble of 1997-2000, when stock markets saw rapid growth in technology companies. It peaked on March 10, 2000 when the NASDAQ reached over 5,000 before falling. The bubble led to good economic conditions and employment levels initially. However, when it collapsed, there was a recession, many companies went bankrupt as stock prices fell sharply, and over 500,000 people in the US tech sector lost their jobs by 2002. Both the rise and fall of the bubble significantly impacted financial markets and the economy.
Sub prime & eurozone crisis
The document summarizes the subprime mortgage crisis that began in the United States in 2007 and its impacts globally. It discusses how loose lending practices in the US housing market led to a bubble that burst in 2006-2007. This caused ripple effects through the global financial system as US and European banks and financial institutions suffered huge losses, leading to a lack of liquidity and credit, government bailouts, and falling stock markets worldwide. While the crisis was still unfolding, there were debates around how long recovery might take and whether more reforms were still needed to stabilize the financial system.
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Major Market Crises of History: Reason and Effect
- 1. Major Market Crises of History: Reasons and Effects
- 2. Crises Covered: 01 Wall Street Crash of 1929 02 Dot-Com Bubble 2000 03 Financial crisis of 2008 (Global Financial Crisis)
- 3. Wall Street Crash 1929 Pic - 1: Newspaper clipping of 1929
- 4. Reasons: ❖ Three main reasons behind market crash ➢ Overextended Credits ➢ Uncontrolled & Unplanned Spending (puting credit money in market) ➢ Overproduction ❖ Higher Purchase Power - people could buy on credit ❖ USA’s industry was boosted by the end of WW1 ❖ Confidence (despite of Experts worry) ❖ Idea was “Get rich, quick” ❖ Investors sell their share to make huge profit.
- 5. Fig - 1: Flow Chart of Wall Street Crash 1929
- 6. Effects: ❖ 1616 banks go bankrupt ❖ 20k+ companies get shut down or go bankrupt ❖ 12+ million people lost their jobs ❖ Purchase power reduced drastically ❖ Sudden Break in Money circulation ❖ Above cycle continues to role ❖ Followed by The Great Depression Pic - 2: New York Stock Exchange 1929
- 7. Dot Com Bubble 2000 Pic - 3: Newspaper clipping of 2000
- 8. Reasons: ❖ 90’s was the decade when internet become widely available ❖ Many internet based company came to existence ❖ People start investing in any company with ‘.com’ in name ❖ Speculation grow big and big, many companies experienced exponential growth ❖ “Free Spending” ⇒ Increasing customer base as rapidly as possible by bearing significant losses ❖ Due to the new nature and meteoric rise of the industry Venture Capitalists also invested heavily fueling the growth of bubble
- 9. Cont: ❖ Main reasons why the dot-com bubble bust: ➢ B/W 1999-2000 US Federal Reserve increased interest rate six times ➢ Drop in IT spending after Y2K ➢ Lockup period Expiration Pic - 4: NASDAQ Composite
- 10. Timeline: Fig - 2: Timeline of Dot-com Bubble 2000
- 11. Effects: ❖ Due to all the above mentioned reasons on 13th March 2000 a large no of sell order for IT stocks were placed ❖ Technology heavy NASDAQ drop from 5038 to 4879 in one day ❖ These triggered a chain reaction of selling, in 3 days NASDAQ fall 9% falling to 4580 ❖ NASDAQ eventually fall 78% upto 1114 till october 2002 ❖ Over the course of 2.5 year from Mar 2000 to Oct 2002, 5 trillion dollar was removed from the market
- 12. Cont: ❖ Companies which survived dot-com bubble are likes of amazon, ebay, yahoo etc. ❖ And due to these almost half of the internet companies got bankrupt or get liquified and probably due to that some good companies also suffered and couldn't became household names
- 13. Financial Crisis of 2008 (GFC) Pic - 3: Newspaper Clipping of GFC 2008
- 14. ❖ After 9/11 US Federal Reserve System reduced interest to 1% ❖ Due to this fixed income investor start looking different options ❖ Investment Bank introduced MBS (Mortgage Based Security) ❖ People take loans to buy real estate property and keep that only as mortgage. ❖ Banks cloupe thousand’s of mortgage property and make them MBS and sell to institutional investor. Reasons:
- 15. Cont: ❖ If a loan has been defaulted then the property came in market for sell so the bank can recover their money. ❖ But the person who buy that property has high chances also take loan so the the amount outstanding on a particular property is increasing. ❖ Due to this of over supply and over demand the loan given grow multiple folds but asset associated with it is same.
- 16. Fig - 3: Cycle of Over Supply and Over Demand
- 17. Effects: ❖ It started in 2007 with subprime crisis in USA ❖ Collapse of Investment Bank Lehman Brothers on 15th Sep 2008 ❖ Stock market crash on 16th Sep 2008 ❖ In Aug 2007 is was clear subprime crisis can’t just be handel by stock and it will grow out of the country also. ❖ Inter-banking market fully shutdown, creating fear among banks worldwide ❖ There were liquidity shortage in the system
- 18. Cont: ❖ Government around the world had to give bail out to banks to be functional ❖ Because of this the crisis spread to other sectors also. Fig - 2: Root cause of GFC 2008
- 19. Thank You