Economic collapse is one of a variety of poor economic conditions, ranging from severe and prolonged depression to high bankruptcy and high unemployment (such as the Great Depression in the 1930s), to general deterioration. trade caused by hyperinflation (as in Weimar Germany in 1920), or even economically leading to a sharp increase in mortality rates and possibly even a decline in the population (as in the former Soviet states in the 1990s).
Economic collapse is often accompanied by social disorder, civil unrest and disturbance of law and order.
Video Economic collapse
Cases
There are several well-documented cases of economic collapse. One of the best documented cases of a near collapse or collapse is the Great Depression, the cause still being debated.
"To understand the Great Depression is the Holy Macroeconomic Grail." - Ben Bernanke (1995)
Bernanke's comments address the difficulty of identifying specific causes when many factors contribute at different levels.
The economic collapse of the past has political and financial causes. Ongoing trade deficits, wars, revolutions, famines, depletion of vital resources, and government-triggered hyperinflations have been listed as causes.
In some cases, blocking and embargos cause severe difficulties that can be regarded as economic collapse. In the US, the Embargo Act of 1807 prohibits foreign trade with belligerent European countries, causing a deep depression in an economy that relies on international trade, particularly in the shipping industry and port cities, ending a massive explosion. United States Conflict Blockade has destroyed many plantation owners in the South; However, the South has little economic development. The German blockade during World War I led to starvation of hundreds of thousands of Germans but did not cause economic collapse, at least until the political turmoil and hyperinflation that followed. For the Confederation and German Weimar, the cost of war is worse than the blockade. Many planters in the South have their bank accounts confiscated and also all have to free their slaves without compensation. Germany must make war reparations.
After a defeat in war, the state or the conqueror faction can not accept paper currency from the losers, and the paper becomes worthless. (This is a Confederate situation.) Government debt obligations, especially bonds, are often restructured and sometimes become worthless. Therefore, there is a tendency for people to hold gold and silver during times of war or crisis.
Maps Economic collapse
The effects of war and hyperinflation on wealth and commerce
Hyperinflation, war, and revolution lead to a buildup of essence and market disruption. In some past hyperinflations, workers are paid every day and soon spend their income on essential items, which they often use to barter. The store shelves are often empty.
More stable foreign currency, silver and gold (usually coins) are held and exchanged at local currency places. The state of precious metal coin printing tends to be relatively insignificant. Jewelry is also used as a medium of exchange. Alcoholic drinks are also used for bartering.
Individuals who are desperate to sell valuable items to buy essential items or exchange them with gold and silver.
In German hyperinflation, stocks hold more of their value than paper currency. Bonds that are denominated in bloated currencies can lose most or all of the value.
Bank holidays, conversions or foreclosure accounts and new currencies
During the severe financial crisis, sometimes the government closed the bank. Depositors may not be able to withdraw their money for a long time, as was applicable in the United States in 1933 under the Emergency Banking Act. Withdrawals may be limited. Bank deposits can be converted by accident into government bonds or to new currency with lower value in foreign currency.
During financial crises and even less severe situations, capital controls are often imposed to restrict or prohibit transferring or personally taking money, securities or other valuables from a country. To end the hyperinflation, a new currency is usually issued. Old currency is often not worth exchanging with new ones.
See also: Financial oppression
Historical examples
China 1852-70
The Taiping Rebellion followed by internal warfare, famine and epidemics caused the deaths of over 100 million and greatly reduced the economy.
Weimar Germany
After Germany lost World War I, political instability resulted in the killing and murder of hundreds of political figures. (See: German Revolution 1918-1919 and Kapp Putsch) German finances were very strained by war and reparations in accordance with the Treaty of Versailles. Unable to raise enough taxes to run the government and make war reparations, the government was forced to print money that resulted in severe hyperinflation. One book on hyperinflation, which includes quotes and some first-hand accounts, is Currently Death .
Hyperinflation finally ended, he cleaned up government debt at the cost of savings citizens. Some believe that hyperinflation in 1923 helped to revive the rise of the Nazi party and the rise of Hitler to power in 1933. Economists, however, tend to attribute Hitler's rise to Deflation and the Great Depression since 1929. Paul Krugman concluded that hyperinflation of 1923 did not bring Hitler came to power; it is deflation BrÃÆ'¼ning and depression. Before 1929 the Nazi party actually declined by less than 3% of the vote in the German federal election of 1928 (see election results of the Nazi Party).
The Great Depression of the 1930s
Although not exactly a true economic collapse, the 1930s saw the world's worst economic contraction since the start of the Industrial Revolution. In the US, the Depression began in the summer of 1929, soon followed by a stock market crash in October 1929. American stock prices continued to decline accordingly and started until they hit a low in July 1932. In the first quarter of 1933, the banking system was broken: asset prices had collapsed, bank loans have largely stopped, a quarter of the American workforce is unemployed, and real per capita GDP in 1933 is 29% below 1929. The next rapid recovery was disrupted by the great recession of 1937-38. The United States fully recovered in 1941, just before the entry of World War II, which gave rise to the as dramatic boom of the Depression that preceded it.
While there were many bank failures during the Great Depression, most banks in developed countries survived, as did most currencies and governments. The most significant monetary change during depression is the death of the gold standard by most of the countries it contains. In the US, the dollar can be exchanged for gold until 1933 when US citizens are forced to surrender their gold (except for 5 ounces) for fiat currency (See: 6102 Executive Command) and are barred from monetary gold over the next four decades.. Furthermore, gold is valued again from $ 20.67 an ounce to $ 35 per ounce. The US dollar remained in exchange for gold by foreigners until 1971. Gold ownership was legalized in the US in 1974, but not with a legitimate auction status.
As bad as the Great Depression, it happens during periods of high productivity growth, which causes real wages to rise. High unemployment is partly a result of increased productivity, allowing the number of hours from standard working weeks to cut while restoring economic output to previous levels after several years. Workers who keep working see their real earnings every hour rising as wages stay constant while prices fall; However, overall income remains relatively constant due to reduced working weeks. Turning the dollar into a fiat currency and devaluing gold ensured the end of deflation and created inflation, which made the accumulation of high debt during the 1920s boom easier to repay, even though some debt was wiped out.
Economic collapse of Soviet communism
During the 1980s, the Eastern Bloc, which relied on a stagnant form of planned economy, had a period of stagflation for a decade, and finally collapsed from which it did not recover, culminating with the revolution and fall of the communist regime throughout Central and East. Europe and finally in the Soviet Union. This process was accompanied by a gradual and important easing of restrictions on economic and political behavior in the late 1980s, including satellite states.
The collapse of the Soviet Union is characterized by an increase in mortality rates, especially by men over 50, with alcoholism being the main cause. There is also an increase in crime and murder by force. The population of Russia peaked in the 1990s and is lower today than it was two decades ago, as demography shows Russia.
A direct report on conditions during the economic collapse was told by Dmitry Orlov, a former Soviet citizen who became a US citizen but returned to Russia for a time during the crisis.
Russia's financial crisis of 1998
After fewer stabilizations after the disintegration of the Soviet Union, a severe financial crisis occurred in the Russian Federation in August 1998. This was due to low oil prices and government spending cuts after the end of the Cold War. Other countries in the former Soviet Union are also experiencing economic collapse, although a number of crises also involve armed conflicts, such as in the Chechen region. Standard by Russia on its government bonds in 1998 led to the collapse of heavily leveraged Hedge Fund Management of Long-Term Capital, which threatened the world's financial system. The US Federal Reserve is organizing a LTCM bailout that handed it over to a banking consortium. Argentina's economic crisis (1999-2002) Argentina's economic crisis (1999-2002) h3>
Video documentary of Argentina's economic crisis
Current economic trends
In Latvia, GDP declined by more than 20% from 2008 to 2010, one of the worst recesses in record. In Greece, GDP declined by more than 26% from 2008.
Venezuela
Since 2013, Venezuela has experienced an economic crisis. This is the worst in Venezuela's history, caused by the president's economic policies, NicolÃÆ'¡s Maduro, the fall in oil prices and internal and external factors. Since 2014, Venezuela's GDP has been in recession, down more than 40%. The economy has collapsed, causing shortages of basic necessities, economic downturns and hyperinflation since 2017. Also, there has been a drastic increase in crime, corruption, poverty and hunger.
Alternative theory
Austrian School
Some economists (ie the Austrian School, especially Ludwig von Mises), believe that government intervention and excessive economic regulation can cause conditions to collapse. In particular, Austrian theoretical research has focused on issues such as those derived from the socialist forms of economic organization. But this is not a theory of economic collapse involving the description of free-functioning financial markets; on the contrary, the focus is on economic damage and crisis that comes from state control.
However, many Austrian economists also subscribe to what is called "ABCT", or Austrian Business Cycle Theory. The economic expert, Roger Garrison, described the bubble as an unsustainable explosion (not a theory of all depression), as Mises and F.A. Hayek, despite their disagreement about how to work properly. An important part of this theory is that it is inherently unsustainable to try to manipulate monetary policy to increase investment and consumption; usually through interest rate manipulation and bond purchases and such. The "explosion" was created by "malinvestment," as Mises called it; poorly sustainable and unsustainable business decisions in the long term as lowering interest rates by increasing the supply of money and credit will only work in the short term, but will eventually collapse as the government can only hold interest rates for so long before the fear of inflation kicks in (and deflation comes at the peak of the business cycle), or they get into hyperinflation (which is really beyond the realm of ABCT).
Georgism Explanation
In "The Science of Political Economy", published in 1905, Henry George argues that since land is a scarce resource, it is primarily subject to speculation. George used "land" to refer to the ownership of the right to use resources. These include mining, water, fisheries, and timber rights, roads and rail rights, and several patents. Today, we will add "land" items such as taxi medallions, telecom licenses, and "rights" pollution. Henry George followed his analysis with medicine: eliminating all taxes except taxes on the value of the land. The "single tax", which came to be known, will strengthen the economy by breaking up large, unused holdings, making land available to those who will use it. And it will suck air from a speculative bubble, dampening boom and bust cycles. Henry George died before the publication of a series of books, and parts of the book were nothing more than outlines, essays and lectures as they appear on the cover page. He also stated that the expansion of money supply, should be 1 percent or so, to maintain healthy growth, and reduce savings, and encourage spending, and he wants a debt-free currency. (Our current currency, in 1913 was born of debt).
Georgescu-Roegen's theory of the ever decreasing earth carrying capacity
Romanian economist Nicholas Georgescu-Roegen, an economic ancestor and founder of the eco-economic paradigm, argues that Earth's carrying capacity - that is, Earth's capacity to sustain human populations and consumption levels - is bound to decrease at some time. the future because a limited supply of Earth's mineral resources is currently being extracted and used; and consequently, that the world economy as a whole leads to the inevitable collapse of the future, leading to the destruction of human civilization itself.
Georgescu-Roegen based his pessimistic predictions on the following two considerations:
- According to his ecological view of "entropy pessimism," matter and energy are not created or destroyed in the human economy, only changed from countries available for human purposes (valuable natural resources) to unavailable countries for human purposes (not waste and pollution). As a result, all human technologies and activities only accelerate the common marches against the planet's "hot death" from degraded energy, depleted natural resources and a deteriorating environment - the maximum entropy state on Earth. According to his social theory of "bioeconomics," the human economic struggle to work and earn a living is largely a continuation and extension of the biological struggle for survival and survival. This struggle manifests itself as a permanent social conflict that can be eliminated either by human decision to do so or by the social evolution of mankind. Consequently, we can not biologically detain collectively permanently and voluntarily for the benefit of future generations of the unknown; population pressure on Earth's resources will do nothing but increase.
Together, the Industrial Revolution in Britain in the second half of the eighteenth century had inadvertently pushed the human economy into a long overshoot-and-collapse course and never returned with regard to Earth's mineral stock. The world economy will continue to grow until its inevitable and final collapse in the future. Since then, increasingly deep scarcity will worsen social conflicts around the world and ultimately spell the end of mankind itself, Georgescu-Roegen says.
Georgescu-Roegen is the founder of the ecological economic paradigm and is also regarded as the main intellectual figure that influences the degrowth movement. Consequently, much of the work in this field is devoted to discussing the impossibility of existentially distributing unlimited stocks of Earth's mineral resources evenly between the number of present and future generations that are unknown. This number of generations is likely to remain unknown, as there are few ways to know beforehand if or when mankind will eventually face extinction. Consequently, any the understandable intertemporal distribution of shares will inevitably end with a universal economic downturn at some future point.
See also
Example:
References
External links
- Some aspects of national economic evolution of the country in the system of international economic order.
- Long Emergency Plan
Source of the article : Wikipedia
0 Comments