Causes of a financial crisis
There are a number of causes of a financial crisis, attending to various economic factors indicative of its creation in advance. Commonly, these symptoms in turn cause other types of crisis in economies.
Often and given the usually cyclical nature of the economy, causes of a financial crisis appear through different indicators. These allow us to measure the proximity of these crises known to affect the financial part of any economic crisis.
It is common for the appearance of financial crises to act as a starting point for many other types of crises with economic nuances. This happens when the financial sector affects countless areas of economic reality.
Main indicators prior to a financial crisis
Although there is not always a list of infallible recipes for detecting financial crises, experience and the analysis of economic history allow us to point out some common features of every financial crisis:
- Little coordination between the control bodies of the banking and monetary systems, either in the creation or in the adoption of economic policies in a not very synergistic way
- At the same time, the lack of control and surveillance of economic institutions can often lead to misconduct or practices.
- Solvency problems on the part of banks and credit entities, often caused by a crisis of confidence in the system by the population
- Due to the previous point, it is usual for the level of credits and loans to be drastically reduced
- Specific liquidity problems in families or companies that cannot meet their payment commitments. The same can happen with states that are not capable of facing their public debts
- Intervention of states or economic unions through bailouts or more severe economic policies. More restrictive paths of austerity are often taken
- Appearance of bubbles in certain sectors. Cases such as the technology or real estate bubble in recent decades are clear examples of this. They are often accompanied by marked inflation situations
Apart from the more generic causes previously described, it is also possible the appearance of new decisive factors for the appearance of this type of crisis. A clear example is the last great economic and financial crisis of the past decade, originated in its roots in real estate and the malpractice of banks when granting mortgage loans in the United States.
From this origin and with a chain effect, this evil was progressively contaminating the world system in part due to the nature of the financial derivatives placed on the market, causing the fall of multiple financial entities and significant negative effects in countries around the world.
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