We all know about the great depression in the early 1930s, but I was actually surprised by the number of recessions in the world since. Here are the major ones:
1. Latin America's woes
Latin America has long endured economic problems like currency crises, hyperinflation, banking failures etc. The lack of prudent governance and macroeconomic populism continued till 1980s, when the economic reforms were introduced. These measures included:
- State - owned firms were privatized
- Import restrictions lifted
- Budget deficits trimmed, inflation became a priority
- Impending devaluation of Mexican pesos not handled well
- High government spendings and
- Wide spread corruption and dollar-loan exposure
2. Japan's downturn
Japan suffered laggard economic growth and recessions in the most of the 1990s (also known as the lost decade. The crisis started in Japan in 1989-90 and the reasons were:
- Loose financial regulation, bad debts.
- Bubble in stock markets and real estate from 1986-1990
3. South East Asia's crash
South Asia till late 1990s was a tremendous success story. The region saw extended economic growth and was a role model for many. All that changed in 1997 when the many south Asian economies were caught in a currency crisis: Thailand, Malaysia, Indonesia and South Korea to be precise. Again economists disagree over exact reasons for this crisis, generally the following factors are considered to be the culprit:
- Started with currency collapse of Thai Baht, which was long under attack from speculators and hedge funds. Government finally floated Baht leading to its fall.
- Crony capitalism where in these economies there was a collusion between government and big business players.
- These economies had relatively free markets and light regulation, which led them vulnerable to the vagaries of foreign investors.
- This crisis led to slumping currencies, stock market devaluations and precipitous private debt
Also known as the dot com bust, happenned in 2001. There was a considerable bubble in the stock markets of western economies from 1996-2001. The bubble was caused by inflated valuations of stock markets, especially internet and technology related firms. These firms in turn had flawed business models, where in all of them were rooting for growth over profits working under the assumption that finally profits will come once the markets are captured.
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