World Business Expo

A very significant negative impact that has had the world’s economic history is the financial crisis of 1929-1933. This crisis starkly reflected the deep contradictions of the capitalist system. The failure of the U.S. economy was so alarming.

In the four years of the 5761 banking crisis broke. Exports declined significantly from 5157 million in 1929 to only 1647 million in 1933. The crisis manifested itself in industry, agriculture, commerce, banking, since all sectors were affected.

The crisis spread worldwide and as the country’s economic fundamentals were sound, the Wall Street crash occurred in the United States a period of economic stagnation known as the Great Depression. The first effect of the crash was the failure of numerous banks consequently resulting in a weak financial system.

Another example of long-term financial crisis is the case in Japan. In 1985 the Japanese economy experienced a temporary downturn due to the dramatic adjustment in the price of the dollar and the yen accelerated sorrel happened as a result of the Plaza Accord. The deflationary impact of the yen’s rise had serious effects on Japan’s economy.

The Government and the Bank of Japan began to take fiscal and monetary measures with a view to promoting economic recovery and reduce the current account surplus. The most significant points of this set of measures included reducing the official discount rate to 2.5% additional allocation of 6 trillion yen for public works projects and reductions in income tax amounting to approximately 1 million of millions of yen.

In the second half of the 80s and especially since the end of 1987-1989, the share prices were inflated and soil at an accelerated pace, as if it were a sort of giant bubble in the Japanese economy. This rise in prices resulted in a stock market speculation and real estate.

This speculation is largely due to interest rates, as low interest rates mean in turn that asset prices are high. Both cases are related: a drop in interest rates increases the expected long-term gains on assets [2].

credit to: Msc. Ernesché Rodríguez Asien
Source: www.gestiopolis.com/canales8/fin/especulacion-financiera-y-sus-consecuencias.htm
image source: www.oconnell.eu/newsletter/Q4_2008/financial_services.jpg

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