Financial Speculation and Its Implication -part 4-
Another important factor for the formation of the bubble was an excess of appropriations. This was what actually occurred in the late 80s. Between 1987 and 1989 the amount of money in circulation experienced an average increase of 10.8% annually and exceeded the growth of gross national product (GNP) rated an average of 4.5 points.
Excessive growth of liquidity used for asset transactions or in other words, to inflate the speculative bubble. Between 1985 and 1990 financial deregulation that accompanied the total monetary issue which grew an average of 10% voids resulted from the second half of 1988, excessive speculative boom that led to the purchase of land, stocks, paintings and articles of luxury. [3]
In the spring of 1987 when Alan Greenspan did in the wisdom of the Federal Reserve Paul Volcker, the discount rate rose one point. The Bank of Japan seemed likely to follow the same example in October.
But a stroke of bad luck in October 1987 forced them to activate the credit policy motivated by the landmark “Black Monday” on October 19, when the U.S. stock market crash dragged the Tokyo, Singapore, London and Frankfurt, among others. To overcome the crisis the U.S. authorities pumped money into the system quickly lowered the interest rate and called on rich countries to follow suit in order to help the consistency of the dollar.
Since early 1990 the bubble economy began to collapse with the rapid collapse of stock prices. Thus, adding to the financial constraint, the outbreak of the Gulf War and the decline of the economy, fell sharply the price of land, works of art and precious metals.
An important fact of the harmful effects of the latest financial speculation in the global economy is the one that occurred on Tuesday February 28, 2007, when there was a general collapse in major world markets, which was reminiscent of the turbulent days of the second half of the nineties.
It is estimated that total losses on world stock markets in four days was approximately 1.5 trillion dollars. The Chinese stock market fell sharply, the Shanghai Composite Index down 9%, caused mainly by accelerated sales of shares by some investors.
It is proven that the large volume and speed of operations with the extension of the market in the last decade of the twentieth and early twenty-first has also resulted in the disintegration of the socialist camp in Eastern Europe and the universalization of structural adjustment policies, liberalization and openness.
credit to: Msc. Ernesché Rodríguez Asien
Source: www.gestiopolis.com/canales8/fin/especulacion-financiera-y-sus-consecuencias.htm
image source: www.cviog.uga.edu/images/photos/training_financial1.jpg
Possibly Related Articles:
Leave a Reply
You must be logged in to post a comment.