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Can someone please help me with this essay question. I though it would be straightforward but it seems to be quite difficul for, probably because I hate economic history.

"Has excessive debt been the basic cause of most of the crises since the First World War?"

I've been able to highlight The Great Depression, The German Hyperinflation and The 2008 Financial Crisis as being caused by debt but I can't think of any other crisis.

Thanks..
(edited 6 years ago)
Reply 1
I haven't really done anything on this but I'd have thought that the 2008 crisis was probably exacerbated by poor debt issues since it stemmed from issues with subprime mortgages. Really I have no idea but maybe regulation could be a counteracting point since the Glass-Steagall act was repealed in the 90s. Remember that there is a counter argument though to be made, the oil crisis during the 70s is a different option to explore
Reply 2
Thanks for your help.
I havent yet thought of a counter argument for the 2008 financial crisis but reading up on The Glass-Stegall Act it seems very useful.
Please do not make multiple threads asking the same question - I've merged your previous thread asking this question with this one.
The great depression- too less debt issuance leading to lower AS of credit
German hyperinflation- too much debt issuance/ increase in money supply or M
Black Wednesday- poor monetary policy/ pegging unsustainable exchange rates which is higher than the equilibrium rate
08 depression- loose monetary policy leading to a speculation boom (animal spirits) thus effectively tricking investors to allocate purchases on high risk, high yield bubbles and cheap credit under Alan Greenspan lead a property investment bubble as AS remained largely stable but AD increased as people speculated future increases and chose to purchase houses
I remembers the Asian crises caused by bad investments/ speculation in the stock market and the Japanese depression caused by Public and Private debt reduction practices/ a balance sheet recession where the private individuals and citizens recognized a gap between assets and liabilities thus they tried to lower liabilities in proportion to their assets, this shifted resources away from expenditures thus lowering company profits and it created a self fulfilling vigorous cycle. The government stepped in by lowering interest rates at the zero lower bound to make credit cheap and fiscal stimuli to put confidence in the markets, influencing market expectations by speculating future price rises and temporarily increasing demand to make up for the private sector gap in demand by fiscal measures. Every time figures risen back to normal rates, the government did the opposite in the name of fiscal responsibility thus discouraging consumer expenditures (1997 Japan's VAT/consumption tax rise towards 5%). Whilst this happened, fertility rates reduced for the Japanese and this caused the working age population to reduce whilst increasing welfare costs (increasing opportunity costs). As of present, 20 years since the depression began, Shinzo Abe's government and BOJ governor Kuroda have undertaken massive structural reform of regulation burdens (reducing and eliminating unnecessary burdens), subsidies changes (reducing subsidies on agriculture and reducing duties on imported foods to drive costs down) etc, massive stimulus packages to lift aggregate demand (through tax cuts and infrastructure investment projects) and shifting tax burdens towards consumption rather than income and reducing business rates to encourage innovation and the entrepreneurial spirits and massive monetary action through nirp, 10 year T bond's ycc (to allow flexibility for fiscal action) and qqe to shift demand to purchase riskier bonds away from Japanese Tbonds.
(edited 6 years ago)
Reply 6
Original post by rgwehidshi1
I remembers the Asian crises caused by bad investments/ speculation in the stock market and the Japanese depression caused by Public and Private debt reduction practices/ a balance sheet recession where the private individuals and citizens recognized a gap between assets and liabilities thus they tried to lower liabilities in proportion to their assets, this shifted resources away from expenditures thus lowering company profits and it created a self fulfilling vigorous cycle. The government stepped in by lowering interest rates at the zero lower bound to make credit cheap and fiscal stimuli to put confidence in the markets, influencing market expectations by speculating future price rises and temporarily increasing demand to make up for the private sector gap in demand by fiscal measures. Every time figures risen back to normal rates, the government did the opposite in the name of fiscal responsibility thus discouraging consumer expenditures (1997 Japan's VAT/consumption tax rise towards 5%). Whilst this happened, fertility rates reduced for the Japanese and this caused the working age population to reduce whilst increasing welfare costs (increasing opportunity costs). As of present, 20 years since the depression began, Shinzo Abe's government and BOJ governor Kuroda have undertaken massive structural reform of regulation burdens (reducing and eliminating unnecessary burdens), subsidies changes (reducing subsidies on agriculture and reducing duties on imported foods to drive costs down) etc, massive stimulus packages to lift aggregate demand (through tax cuts and infrastructure investment projects) and shifting tax burdens towards consumption rather than income and reducing business rates to encourage innovation and the entrepreneurial spirits and massive monetary action through nirp, 10 year T bond's ycc (to allow flexibility for fiscal action) and qqe to shift demand to purchase riskier bonds away from Japanese Tbonds.


Omg Thank you so much. You are a serious life saver.
I think my problem was I was focusing too much on well known crisis like the great depression rather that looking into crises that are not so talked about. You've helped a lot.

Thank you :smile::smile:

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