023 Financial Crises, Causes and Cures
How did Tulips Crash the Dutch Economy?
During the 16th to 17th century, the Dutch were experiencing a Golden Age, in which Dutch trade, science, art, and military were among the most acclaimed in Europe. The Dutch had the most advanced financial system at the time, establishing the first-ever joint-stock company and the earliest stock exchange.
It was also during this time when the first market bubble and crashes happened, known as Tulipmania. As tulips were introduced into Europe by trade, they soon became a luxury item and a symbol of status. The tulip fever transformed into an economic bubble, as speculation began to drive the value of tulip bulbs to extreme prices, where some of the rarest tulip bulbs would trade for as much as six times the average person's annual salary.
As the craze continued, traders would sell tulips without having them in stock. Buyers would put in a bid without actually having the money. Some traders would even put in bids for a bulb, ready to sell it for a higher price to the next interested person. The chain of events caused a lot of people to put a lot of their money into the tulip trade, including some of people's lives savings.
A crisis was inevitable. Soon, suppliers couldn't supply anymore and many buyers couldn't afford to pay their bills any longer. The hype eventually died out and the prices of tulip bulbs eventually plummeted.
What can Tulipmania teach us today about market bubbles?Is cryptocurrency the 21st-century Tulipmania?
Brazil Five Centuries of Change
The Great Depression was the longest and most severe economic depression experienced by the western world. Despite suffering a depression after the 1929 crash, Brazil was able to emerge from it much sooner than England or the United States, sustaining its recovery through World War II.
What helped Brazil to recover faster from the economic depression compared to other countries?
70 Years of Economic History in The People's Republic of China
Image by Visual Capitalist
In the past 70 years, China has risen from being a poor developing nation into a global superpower. Today, China is the second-largest economy in the world and one of the fastest growing.
What led China to grow so quickly? What can we learn from China's economic reform?
The Global Financial Crisis of 2007 -- 2008
The Global Finacial Crisis of 2007 -- 2008 was the most serious financial crisis that occurred in the 21st century. Between cheap credit and lax lending standards, a housing bubble was formed and later collapsed the US housing market. Altogether, between late 2007 and early 2009, American households lost an estimated $16 trillion in net worth.
Why do global financial crises happen? Can these crises be prevented? What role do governments play in financial crises? Which financial regulations are most likely to prevent crises?
Too Big To Fail
Author: Andrew Ross Sorkin
Andrew Ross Sorkin delivers the first true behind-the-scenes, moment-by-moment account of how the greatest financial crisis since the Great Depression developed into a global tsunami. From inside the corner office at Lehman Brothers to secret meetings in South Korea, and the corridors of Washington, Too Big to Fail is the definitive story of the most powerful men and women in finance and politics grappling with success and failure, ego and greed, and, ultimately, the fate of the world’s economy. - Good Reads
Photo by Good Reads
Photo by The History of the Stock Market
With recent events, such as the COVID-19 pandemic, the Russian & Ukrainian War, and rapidly rising inflation, many wonder when the next financial crisis will be.
Financial crises have plagued the world’s economies for almost eight hundred years. Why do these crises happen? Can national governments prevent financial crises and the havoc they wreck on citizens’ well-being? Which financial regulations are most likely to prevent crises? And what negative effects might these regulations have on the economy overall? In the course, students will examine particular crises to see what general principles regarding their causes, and what – if anything – can be done to stop them. Along the way students will learn basic financial theory of institutions (e.g. investment banks and asset management companies), financial instruments (e.g., debt, equity, and mortgage-backed securities) and financial markets (e.g., stock markets, private debt markets). This workshop probes how society’s view of the financial sector has been shaped by the effects of recurring crises throughout history.
Who is this Workshop for?
High school students who are interested in doing research in the areas of economics, history, finance, political science, or sociology.
No specific skills are needed, beyond a basic working knowledge of spreadsheets (e.g. Google Sheets / Excel) and basic algebra
All students in this workshop will conduct original research. With support from the professor, students will learn how to: formulate original research questions, develop a hypothesis, conduct a literature review, choose relevant methodologies, and analyze data.