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Crises

In: Business and Management

Submitted By murmis9
Words 587
Pages 3
History shows us that Bubbles always implode: by definition a bubble involves pattern of price changes or cash flows. The implosion of the asset price bubble in Japan led to massive failure of a large number of banks and other types of financial firms and more than a decade of economic growth.The implosion of the asset price bubble in Thailand triggered the contagion effect and led to sharp declines in stock prices throughout the region.
The changes in the foreign exchange values of national currencies and a price changes of gold from 1970th until 1990th were often extremely large. The U.S. dollar price of gold increased from $40 an ounce at the beginning of the 1970s to nearly $1,000 an ounce at the end of that decade; at the end of the 1980s the price was $450, and at the end of the 1990s it was $283. In nowdays the price of gold is $1500 per ounce. A massive foreign exchange crisis involved the Mexican peso, the Brazilian cruzeiro, the Argentinean peso, and the currencies of many of the other developing countries in the early 1980s. The Finnish markka, the Swedish krona, the British pound, the Italian lira, and the Spanish peseta were devalued in the last six months of 1992. The number of bank failures during the 1980s and the 1990s was much, much larger than in any earlier decades. These financial crises and bank failures resulted from the implosion of the asset price bubbles or from the sharp depreciations of national currencies in the foreign exchange market; in some cases the foreign exchange crises triggered bank crises and in others the bank crises led to foreign exchange crises. These bank failures occurred in three different waves: the first at the beginning of the 1980s, the second at the beginning of the 1990s and the third in the second half of the 1990s. The bank failures, the large changes in exchange rates and the asset price bubbles were...

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