What is Economic Crisis?

The economy (a term that comes from the Greek language and means “administration of a house or family” ) is the science that studies the processes of production, exchange and consumption of goods and services. A crisis, on the other hand, is a sudden change or a situation of scarcity.

An economic crisis, therefore, refers to a period of scarcity in the production, marketing and consumption of products and services. The economy is cyclical, that is, it combines phases of expansion with phases of contraction. These successive fluctuations are known as the business cycle.

These principles allow us to affirm that every descent culminates in an ascent and vice versa. The four main phases of an economic cycle are the rise (where economic activity increases until the moment of the boom), the decline (the indicators fall), the recession (when the decline extends for more than two consecutive quarters) and the reactivation. (indices rise again and the ascent begins).

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The economic crisis takes place at some point in the decline. It may be a generalized crisis, with a drop in all indices, or a crisis that particularly affects certain sectors (supply crisis, demand crisis). On the other hand, we speak of a subsistence crisis when a social group cannot satisfy its basic needs.

One of the most important economic crises in history is the one that took place in the year 1929. The Great Depression or the Crack of 29 are two other names given to this phenomenon that brought with it consequences of great global gravity, and especially in places such as the United States.

Specifically, among the most relevant consequences of that, which originated as a result of a stock market crisis in the New York Stock Exchange, we could highlight the rise in interest rates, the devaluation of the currency and even the paralysis of the phenomenon of what is immigration.

However, in addition to the aforementioned, we also have to highlight that we are currently experiencing one of the most important economic crises to date. Great Recession is also known as the same one that is affecting the whole world and that began in 2008.

The United States is also considered the country in which the aforementioned originated, which has among its main causes a crisis in terms of mortgages and credits, excessively high prices of raw materials and also a recognized overvaluation of what products are.

In the case of Europe, where this crisis is being suffered more strongly, it seems that the European Central Bank is considered to some extent to blame, since it is believed that, being aware of what was happening, it was not capable of acting. and to implement the measures that could have prevented it.

Another type of crisis is known as a financial bubble or stock market bubble, which occurs when stocks trade at a price much higher than their intrinsic value until they are no longer bought and fall sharply.