Throughout history, various economic crises have affected
all states around the world.
Could we say that it is something cyclical?
Most economists agree that there are cycles of growth and contraction.
But it is important to bear in mind
that these can originate both from internal and external causes,
such as the one that is coming. To refresh your memory a little,
it is necessary to return to the last great crisis,
known as the Great Recession of 2008, which began in the United States
and mainly involved the most developed countries in the world.
Are you interested in remembering the causes,
development and consequences of this economic tragedy?
Alright, then stay until the end of the video.
Today we have the collaboration of my friend Alejandro, from the channel Hipótesis de Poder,
where you can find incredible videos on Geopolitics and economy.
I´ll leave the link in the description.
 
 
To begin, let's go back to the early 2000s,
when raw material prices began to rise sharply.
One of the most important resources, oil, exceeded USD 100 per barrel.
Added to this is a key date,
the remembered September 11, 2001.
After the attacks that left the American population in total uncertainty,
the government opted for a considerable drop in taxes and interest rates.
In particular, we have to emphasize mortgage loans.
To finance the purchase of real estate, subprime loans began to be given.
And with this type of credit,
we refer to loans with a high risk of non-payment,
since they were granted to people without passing a rigorous analysis
of the profile of the payer.
Yes, even if you did not have a stable job or income, you could pass.
This, in the long run, would be the formation of a real estate bubble.
Now, let's roughly explain how this crisis originated.
After these measures to try to revive the economy that generated high debt for people,
the banks that granted these loans created financial instruments
in which they grouped several mortgage loans into a single security
that would be offered in the financial markets.
Likewise, the buyers of these high-risk securities, mainly in Europe,
hired an insurance company that would respond in case the loans are not paid.
And of course, all this without any kind of regulation by governments.
Overall, it was all a well-organized chain that seemed to work well,
as long as the payers can repay their credits with such low interest,
and as long as the credit kept flowing.
All of this would change in 2004,
when the United States Federal Reserve would begin to raise the interest rate,
which had remained around 1% until reaching a peak of 5.25% in 2007,
all due to inflation. And of course,
in the fine print of the contracts with the new owners, the rate could vary.
That is, now with more expensive installments,
lower income payers began to stop paying their debts.
The perfect chain of credit was beginning to fail.
With this, millions of people lost their homes
and the banks began to fill with properties.
Now to whom would they be sold if with all this an economic crisis was coming?
If people do not have money, now they could not buy a property,
especially with a higher rate.
And of course, here begins the chain misfortune.
Buyers were left without property,
banks with thousands of properties unable to sell,
buyers of securities without receiving liquidity,
and insurers and governments unable to make so many bailouts.
And of course, as these titles were bought all over the world,
several countries were dragged into this crisis.
Although in reality there are several factors that led to this point,
and several its consequences around the world,
it is usually considered that the beginning of the great recession occurred
with the bankruptcy of the American bank Lehman Brothers, founded in 1850,
and that it was reached to consolidate
as the fourth largest investment bank in the United States.
As you can imagine, several other financial institutions would go bankrupt,
the investment exchanges would crash,
and in the long run all the people who had made investments
or simply had their savings in the banks, could lose everything.
Yes, quite a domino effect.
Now, let's see the consequences of this real estate disaster by region
In the United States, the focus of the crisis,
the value of the dollar plummeted rapidly.
With the bankruptcy of fifty banks and financial institutions,
the collapse dragged down the stock market values ​​
and the population's ability to consume and save.
In addition, hundreds of thousands of people were left without jobs,
also causing a social crisis.
On the day of Lehman Brothers' bankruptcy,
financial markets fell dramatically and the American International Group,
a major insurer directly linked to the housing bubble,
collapsed along with Lehman. That same day,
the shares of the New York Stock Exchange
had the biggest historical collapse in a single day.
The second most affected area was Europe,
largely because from here several of the titles that were purchased could not be paid.
Faced with this, the European Central Bank,
which was slow to react,
imposed austerity measures that led to difficulties in accessing financing
for both consumers and producers.
Some of the most affected were the Baltic countries,
which reached an economic decrease of more than 10% during 2009.
Other countries such as Denmark had six consecutive months of negative economic growth.
Towards the end of the second quarter of 2008,
the eurozone economy contracted by 0.2%.
Some countries that did not suffer so much from the immediate recession,
but that in the long run had later consequences were
Spain, which ended 2012 with an unemployment rate of 26%,
Portugal, whose crisis lasted between 2011 and 2014,
and especially Greece ,
whose government issued a large amount of public debt to finance its public deficits.
After this, the government of the conservative Karamanlís
would make up the macroeconomic data to calm the population. However,
given the impossibility of continuing to finance the debt,
it required two bailouts of the European Union in 2010 and 2011.
With this disaster, Greece was on the verge of collapse
when the European Union and the IMF discussed the possibility
of abandoning the Greek government to declare bankruptcy. Yes,
they were saved from a serious one. This became known
as the Eurozone public debt crisis, which threatened to drag a default of Greece,
Spain, Portugal and perhaps even Italy, which could have sunk the Eurozone.
The results of the crisis found their greatest diversity in Latin America,
given that while some countries were greatly affected,
others were able to continue with their usual growth.
Some of the latter, Peru, Brazil, Bolivia, Uruguay, Panama and Cuba.
However, others were not so lucky, such as Argentina,
whose economy contracted by 5.5% towards June 2009,
accumulating three consecutive quarters of decline.
But the country most affected by the crisis was Mexico,
due to its economic proximity to the United States.
This includes the decrease in remittances from more than 30 million Mexicans
living in the United States,
as well as the fact that exports and imports to the northern neighbor
represent 33 and 23% respectively. Likewise,
other external factors influenced, such as the epidemic of influenza A H1N1,
which had its epicenter in Mexico, which caused tourism to crash,
one of its main sources of income.
Transporting us to the Asian continent,
the crisis here was seen mostly in all the main commercial partners
of the United States. In the Middle East, it mainly affected Turkey,
Saudi Arabia and the United Arab Emirates,
while other countries continued their usual growth.
In the far east, South Korea and Japan were the most affected.
The latter, at the time the second largest economy in the world,
faced its worst crisis since the end of World War II,
falling as much as 12.7% during the last quarter of 2008.
With all this,
and despite the fact that the crisis also affected the Asian giant,
China was able to maintain an acceptable growth rate of around 8 and 9%,
establishing itself as the first emerging power to surpass Japan during 2010.
Perhaps this It is due to the currency war of which she was accused,
by lowering the price of their currency to obtain competitive advantages
and thus facilitate her exports.
In other regions such as Oceania, the crisis affected Australia,
although without recession, and New Zealand.
The latter went into recession for the first time with a 0.2% drop. For its part,
Africa was probably the least affected continent,
given that almost all countries continued with their normal growth,
except for South Africa and consequently Botswana,
which saw its economy contract by 5.2%.
In short, after talking about so many numbers,
it is necessary to understand how these crises materialize. y.
The effects lead to a worsening of people's quality of life in a domino effect.
With the inevitable unemployment, thousands of people lose their jobs, that is,
they are left without income,
which means that there is less purchasing power and therefore
prevents the movement of money, slowing down the growth of the economy.
With this, the poverty rate of the affected countries increases,
and those that were already poor are even more affected.
Another sector that is declining is health, not only due to the worsening of services,
but also due to a significant increase in people who get sick,
perhaps due to the also rising depression of people after losing their jobs.
Now, going back to what was said at the beginning of the video,
Are we prepared to face the crisis that is coming from the global pandemic that we are experiencing?
Let's be aware that this could be even worse
than what we experienced in that year
due to the stagnation of the vast majority
of economic activities due to quarantines.
Do you want to know about the possible consequences?
Click on this video I made in collaboration with Alejandro on his channel,
Hipótesis de Poder.
And what do you think?
Do you think that the crisis that is coming will be worse than that of 2008?
Do you consider that we are prepared to face it?
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support me with a like and subscribe to my channel
and the Hipótesis de Poder channel.
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Until next time.
