The Causes of the Economic Crises

The Causes of The Economic Crisis

The economic crisis has been a fundamental issue argued by many states all over the world. It started from the US in 2007 and affected gradually the European countries. Politicians and historians assimilate this economic crisis to the one that occurred in 1929. In fact, it had a negative impact on the economy of many countries in the world. The truth is that recently, the world experienced the same scenario of the year 1929. The recent economic crisis was a matter of fear. Indeed, it terrorized the entire world because of its deep impact on people’s life. Then, it would be interesting to study the causes of the economic crisis, so as to find out its mechanisms.

The first cause of the economic crisis is the subprime crisis. Indeed, the subprime crisis which started in the US decreased houses prices. Because of dollars depreciation, the houses price decreased suddenly, that’s why we heard about the “subprime crisis”. In fact, the subprime crisis was the main point behind the economic crisis. American citizen were obliged to leave their houses. Millions of families were kicked out of their homes. Consequently, it lead American households to a serious instability. Banks were not able to solve this problem ; consequently, the crisis spread in Europe, affecting European economy. Going further, apartments price by square meter were so expensive that people couldn’t afford such apartment prices. To sum up, the subprime crisis “ was in the heart of economic crisis.

Households were indebted. That’s what constituted the second cause of economic crisis widespread. In fact, households couldn’t pay back their loans; they were crossing a serious financial crisis! Besides, banks were unable to give loans to people since households were in a very critical situation. To eliminate the risk of banks collapse, household should have repaid back their loans. Consequently, households were in a vulnerable situation which caused the loss of their goods. Some banks were in trouble in such a point that they had to close. American economy was decreasing . It registered an economic growth indicator of about 2.5, which was not really satisfactory, knowing that the US have been the most powerful country in the world, since
the end of the cold war.

The third cause is the inflation. Indeed, the prices in general increased in the american market; hence, it affected the whole world, starting by the European countries. In fact, The speculation on the products was behind the inflation, without forgetting that the price of importations from China to the US increased. The developed countries were affected by the inflation, knowing that they are dependent on the american economy, whereas the third world countries were not affected in the beginning . Besides, the inflation caused the augmentation of oil price, in the Golf countries, which increased the barrel price all over the world. This event had a repercussion on food prices that increased rapidly. This scenario remind us of the first oil crisis,
decided by Golf countries in 1973. As a threat toward the US, Golf countries increased the oil price during the Kippur war, knowing that the US were supporting Israel.

To conclude, the economic crisis created a vicious circle in the entire world. Indeed, each cause has its effect: the subprime crisis forced households to leave their houses. Households were indebted since they couldn’t pay back their loans. Then, banks were unable to give loans for the previous cause. Finally, the economy of the countries was in a critical situation that lead to the collapse of the growth indicator. We notice that the whole world was crossing a serious crisis. However, solutions still exist. Human being need to make their minds function adequately in order to face issues that occur in the world. Me, as a human being, I can make a suggestion: the States could intervene in the economics affairs, so as to cover the bad effects of the
economic crisis.