THE TYPICAL SITUATION BEFORE THE CRISIS
Loading...
Date
2010
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Suleyman Demirel University
Abstract
This article examines the progression of financial crises, analyzing the economic conditions preceding, during, and following a crisis. Typically, crises occur after prolonged periods of high economic growth, elevated employment, and rising asset prices, including stocks and real estate. Initially, companies over-invest and individuals over-borrow, assuming continuous growth. Early signs of crisis include declining revenues, reduced orders, asset sell-offs, and falling stock prices. As the crisis develops, defaults, bankruptcies, and unemployment surge, while banks face liquidity problems due to unpaid loans and depreciated collateral. The full-blown crisis is marked by widespread sell-offs, market collapses, and institutional failures. Recovery requires debt restructuring, acceptance of losses, and reorganization of companies and financial institutions. Key causes include over-optimism, excessive borrowing, and short-term incentives for bank executives. Preventive measures involve strict governmental regulation of lending practices and prohibition of executive bonuses tied to risky lending. Understanding these dynamics is critical to mitigating the impact of future financial crises.
Description
Keywords
Financial crisis, economic growth, stock market, banking, regulatory measures, debt
Citation
Sabdenaliyev Berik/ THE TYPICAL SITUATION BEFORE THE CRISIS / Suleyman Demirel University/ СДУ хабаршысы, 15(2).