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The Causes of the Global Economic Crisis




The new economic crisis emerged in 2008 with the fall of several key players in the financial sector, pushing many countries in the Western World into recession. At the beginning, it was considered that the crisis was limited to the Western economies, especially the USA, the EU, but now it has shown signs of affecting other countries around the World.

In late 2011, the IMF has warned of the economic crisis becoming global. And when the IMF makes such and affirmation, the problem is serious.

The economic crisis itself has had dozens of causes, from the bankruptcy of major banks and insurance companies to the fact that governments have spent way beyond their limits and so on.

There are multiple causes of the global economic crisis.


Several key factors that have lead to the current economic factors are:

 The accumulation of debt: companies, states, but also individuals have accumulated large amounts of debt towards each other, without being able to honor them

 Real estate crises: in the USA, Western Europe and in the United Arab Emirates real estate markets have crashed due to overconstruction (too many buildings constructed, too few sold or rented out) and due to the fact that millions of people could not pay their mortgages (especially in the USA and Western Europe this was a major issue)

 Irresponsible financial speculations: banks, forex investment firms, loan institutions have been conducting speculative activities for decades without thinking about the possible consequences - much of the primary income source in the global economy came from speculative activities, which had no solid basis for value

 Fiat currency: many major currencies are in fact fiat currencies - these are not backed by gold or silver or anything of solid value and, they have been overvalued, therefore they carry a high risk of inflation, drastic diminishing of purchase power

 The rise of oil's price: it's finite resource and we all know there won't be enough oil left to extract in several years - as oil production decreases, its price increases, which heavily influences economies across the globe, pushing gold's and other precious metals'prices higher and higher

 The consequences of lower production: because of the postindustrial era, countries have neglected production and have concentrated more on speculative activities, which are indeed remarkable, but risky - lower production of material goods, more immaterial production, more speculation has led to the domino effect crash that we're seeing today

 Market saturation: countries and firms in certain areas have produced and sold certain goods in such large numbers that markets have been saturated or have gotten near saturation - currently there are few large markets, potential buyers whom to sell large amounts of goods, this means that there are fields, domains of business in which it's almost impossible to make substantial profit

 More modest agricultural production: the World has moved towards industry during the industrial revolution (this happened earlier in the European and North American countries, other countries are industrializing now), then towards the immaterial model/post-industrialism, neglecting the importance of agriculture - but everyone needs food, especially in the context of a growing global population, so the consequence is less and more expensive food

 The paradox and impossibility of infinite growth: specialists have recognized the fact that the global economy cannot grow forever, it's an impossible goal that countries and companies (also) set themselves - we cannot increase incomes





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