The Latin America Debt Crisis - amazonia.fiocruz.br

Shame!: The Latin America Debt Crisis

The Latin America Debt Crisis Video

A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value.

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In the 19th and early 20th centuries, many financial crises were associated with banking panicsand many Amdrica coincided with these panics. Https://amazonia.fiocruz.br/scdp/essay/pathetic-fallacy-examples/analysis-of-the-spirit-of-america.php situations that are often called financial crises include stock market crashes and the bursting of other financial bubblescurrency crisesand sovereign defaults.

Many economists have offered theories about how financial crises develop and how they could be prevented. There is no consensus, however, and financial crises continue to occur from time to time. When a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run. Since banks lend out most of the cash they receive in deposits see fractional-reserve bankingit is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run renders the bank insolvent, causing customers to lose their deposits, to the extent that they are not covered by deposit insurance.

An event in which bank runs are widespread is called a systemic banking crisis or banking panic. Examples of bank runs include the run on the Bank of the United States in and the run on Northern Rock in A currency crisis, also called a devaluation crisis, [5] is normally considered as part of a financial crisis.

Kaminsky et al. In general, a currency crisis can be defined as a situation when the participants in an exchange market come to recognize that a pegged exchange rate is about to fail, causing speculation against the peg that hastens the failure and forces a devaluation. A speculative bubble exists in the event of large, sustained overpricing of some class of assets. If there is a bubble, there is The Latin America Debt Crisis a risk of a crash in asset prices: market participants will go on buying only as long as they expect others to buy, and when many decide to sell the price will fall. However, it is difficult to predict whether an asset's price actually equals its fundamental value, so it is hard to detect bubbles reliably. Some economists insist that bubbles never or almost never occur. Well-known examples of bubbles or purported bubbles and crashes in stock prices and other asset prices include the 17th century Dutch tulip maniathe 18th century South Sea Bubblethe The Latin America Debt Crisis Street Crash ofthe Japanese property bubble of the s, the crash of the dot-com bubble in —, and the now-deflating United States housing bubble.

When a country that maintains a fixed exchange rate is suddenly forced to devalue its currency due to accruing an unsustainable current account deficit, this is called a currency crisis or balance of payments crisis. When a country fails to pay back its sovereign debtthis is called a sovereign default. While devaluation and default could both be voluntary decisions of the government, they are often perceived to be the involuntary results of a change in investor sentiment that leads to a sudden stop in capital inflows or a sudden increase in capital flight. Several currencies please click for source formed part of the European Exchange Rate Mechanism suffered crises in —93 and were forced to devalue or withdraw from the mechanism.

Another round of currency crises took place in Asia in — Many Latin American countries defaulted on their debt in the early s.

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The Russian financial crisis resulted in a devaluation of the ruble and default on Russian government bonds. Negative GDP growth lasting two or more quarters is called a recession. An especially prolonged or severe recession may be called a depressionwhile a long period of slow but not necessarily negative growth is sometimes called economic stagnation. Some economists argue that many recessions have been caused in large part by financial crises.

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One important example is the Great Depressionwhich was preceded in many countries by bank runs and stock market crashes. The subprime mortgage crisis and the bursting of other real estate bubbles around the world also led to recession in the U. The Latin America Debt Crisis economists argue that financial crises are caused by recessions instead of the other way around, and that even where a financial crisis is the initial shock that sets off a recession, other factors may be more important in prolonging the recession. In particular, Milton The Latin America Debt Crisis and Anna Schwartz argued that the initial economic decline associated with the crash of and the bank panics of the s would not have turned into a prolonged depression if it had not been reinforced by monetary policy mistakes on the part of the Federal Reserve, [11] a position supported by Ben Bernanke.

It is often observed that successful investment https://amazonia.fiocruz.br/scdp/essay/calculus-on-manifolds-amazon/the-disease-type-one-diabetes-happens-when.php each investor in a financial market to guess what other investors will do. George Soros has called this need to guess the intentions of others ' reflexivity '. Furthermore, in many cases, investors have incentives to coordinate their choices. For example, someone who thinks other investors want to heavily buy Japanese yen may expect the yen to rise in value, and therefore has an incentive to buy yen, too.]