Financial, economic or whatever name you want to give them, crises have always been common and throughout history mankind has experienced a lot of them. Most of the time, they have occurred in a hazardous way and have provoked major economic disasters that have impacted humanity for decades. Over the course of nearly 300 years, more than fifty crises have been recorded, but we will just give you a brief overview of the 05 that really left their mark.
1- The 1st stock market crash: the Tulipomania of 1637
It occurred in February 1637 in Holland when the price of tulip bulbs fell after several years of intense speculation on them.
So, you may ask, how did simple flowers reached such a level that could cause a speculative bubble? It was during the 16th century that the Netherlands, one of the great European powers at that time, and it was established as the main crossroads of artistic creation.
And here the tulip appeared as this new fashion that noblemen and people from the upper class cherished, displayed on sight as the source of their wealth. Very soon, towards the very end of the 16th century, the trend for this flower spread throughout Europe like wildfire, with the advantage that Holland was the main holder of its cultivation due to its suitable environment.
As a result of that, the tulip during that period became the speculative item par excellence. Everyone wanted it because of the profits it could bring later, even farmers mortgaged their farm for a simple bulb, which shows the inestimable value of this object. For some historians, a tulip bulb could easily be compared to the bitcoin of the 16th century. I can guess some of you who would probably have already become a billionaire considering the number of bouquets they received if tulips had kept their value.
2- The Great Depression of 1929
If Tulipomania was considered the 1st great crisis in history then, the 1929 crisis is referred to as the 1st and most devastating crisis in the recorded history of capitalism. I know that you already have a quite hazy idea of this crisis since it has been quoted many times during your history classes. But a quick recap wouldn’t be bad.
This crisis occurred resulting the collapse of the stock market on Wall Street in New York (USA), on Thursday October 24th 1929. Indeed, during the 1920s, the economy of the USA was flourishing, in this climate of prosperity on a large scale everyone felt the need to invest, to speculate from the simple commoner to the most fortunate men. This allowed the stock market to expand rapidly. By the summer of 1929, the economy was suffering from low wages and debts, as well as famine caused by the drought. The supply was much greater than the demand, which led to a surfeit, nevertheless the value of the shares continued to rise until they reached unexpected heights. And so, on October 24, “Black Thursday“, stock and real estate prices suddenly collapsed. It was the stock market crash. It started in the USA and reached the world. And it lasted for a total of 10 years.
3- The 1973 oil price shock
The OPEC countries (Organization of the Petroleum Exporting Countries), especially composed of Arab countries, declared an oil embargo in order to condemn the United States for providing material and military support to Israel, which was involved in the Yom Kippur War, the 4th conflict, against the OPEC countries.
The embargo also affected the countries allied to the USA, which caused a shortage and an increase in the price of crude oil, which suddenly quadrupled, inevitably leading to an economic crisis in the USA and in many other northern countries.
This oil shock caused a crisis of supply and demand (higher prices for consumers), that’ s why economists have called this era a period of “stagflation” (stagnation and inflation). This crisis is not less than the one we are experiencing today with the soaring price of gasoline. (Link).
4- The subprime mortgage crisis of 2008
This crisis has wreaked as much havoc as its predecessor since the Great Depression of 1929. Triggered by an American real estate bubble in the 2000s. The crisis broke out in the summer of 2007 (then known as the subprime mortage crisis). It manifested itself by a drop in real estate, a domino effect causing the collapse of various large banks in the world and a downturn in the stock markets similar to the one of 1929. It also started in the United States and spread to the entire world. It took almost 10 years to completely contain this crisis.
5- The economic crisis of the coronavirus in 2020
This is a crisis that started in 2020 and continues to evolve. What makes it a very unique crisis is that it is not caused by the bursting of a bubble, nor by a surge in the price of any speculative object.
“The economic crisis caused by the epidemic is unique, if we had to try to compare it to something, it would be to a natural disaster. An earthquake, a hurricane, a tsunami… but on a global scale”
Indeed, the measures taken such as the containment and restriction of access to schools, offices, stores … and even travel have caused an economic halt and the stock market crash of 2020.
It is indeed true that these preludes to economic stagnation are so well ingrained. But for 03 centuries till now. Has no measure or even solution has been found to even lower the effects if another crisis would occur? We will discuss this in detail soon. But in the meantime, leave us your comments to see what you think.