April 25, 2020
Economic crisis refers to a situation where the financial status of a nation or a company is below the normal expectations of the country or the company involved. In the entire world of today, the state of the economy has been dogged by many parameters. As far as stakeholders and other economic builders are working out on strategies to have the crisis proscribed, it still remains one of the predicament that the world is facing. Many theories have been forwarded by economists of the world yet the problem remains unsolved.
To start with, banks are the major holders of the economy of whichever institution. Banks have witnessed run periods that have always declared them bankrupt. At the same time, many depositors of money are thereby losing their savings. This state of crisis arises mainly due to banks experiencing a rush of withdrawals by depositors. In the normal marketing strategy, people have to deposit and withdraw money as per the regulations that they hold in their bank statements. This therefore explores into and exemplifies the fact that banks will continue to experience economic crises as long as they are operational.
At the stock markets, economic crises are being witnessed. The financial assets experience a bubble when they undergo a change in the pricing rates. This is a case where the previous price exceeds the present. The existence of bubbles in the market will automatically escort to a crash in the prices of the assets. The state of the occurrence of bubbles is that of never or almost never. This indicates that bubbles will always be there. It is only that they cannot be predicted over time. This shows that any institution that has endeavored in the making of profits will not fail instances of economic crises. The prices of the assets will keep on crashing even with all the measures that have been put to have it under control.
There is also what we call the internal financial crises. This is a state where a country that has had a fixed exchange rate is called upon to devalue its currency due to speculative reasons. This will mean an occurrence of economic crisis in the country. Many nations have experienced this scenario, with many others still to undergo the same situations. This is therefore one of the things that have been happening in the financial market. There is also the case of debts that have not been cleared by some nations. When a nation is called upon to clear sovereign debt, it will be forced to undergo sovereign default. These cases of exchange rates will continue to influence the economy of the entire world. This is as far as people and nations are involved in business activities.
Over the past years, nations have been crying over the problem of economic crisis. This is a case that will never cease as far as people are interacting with one another in the market places, with the nations looking for more power and strength. Many economists have tried to come up with some way of dealing with this problem but it has resisted facing out. It is like a thing to stay in the business world.
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