According to many reputable news outlets, Britain is out of recession. The economy’s size has almost reached pre-2008 levels and the housing market has begun its ascendancy afresh. As we finally say goodbye to the recession or ‘credit crunch’ – as it was initially known – let’s reflect on some of the other grim financial crises that have had a great impact.
THE SOUTH SEA BUBBLE
Although this may sound like a delightfully twee sea ‘shanty’, it was – alas – anything but. In 1711 Britain’s national debt stood at 9 million pounds and, although the economy was burgeoning, the debt needed to be dealt with. The solution was to consolidate it and create The South Sea Company to hold it; they in turn would earn prospective shareholders money through monopolised trading with South American provinces. The scheme was ridiculous – the company couldn’t even trade because of war with Spain; the bubble burst and the country and private investors were crippled.
The astonishing (and terrifying) thing about Black Monday is that nobody knows for sure what caused it or why. On Monday, October 19th, 1987 global stock markets plummeted. It was the greatest one-day percentage decline in stock market history – fortunately it did not lead to recession or worse.
Tulip Mania is generally considered to be the first great financial crash in history and is the earliest example of a financial bubble. The Dutch, similarly to today, were quite infatuated with the Tulip during the early 17th century. Tulips, as their bulbs take several years to develop into a flowering plant, unknowingly cultivated an early futures market. The bulbs reached gargantuan prices before their price inevitably came crashing down.
THE WALL STREET CRASH OF 1929
The crash of 1929 is widely regarded as the worst in economic history as it was a precursor to the Great Depression. Various factors contributed to the crash itself; such as wheat and industry speculation, but the knock-on effects and longevity of the depression throughout America and Europe were shocking to say the least.
THE GLOBAL FINANCIAL CRISIS
Widely considered to be the second-worst financial crisis in history, The Global Financial Crisis was initially caused by speculative trading on subprime mortgages. This in turn led to The ‘Great Recession’, where credit was widely unavailable due to the refusal of the banks to lend.
By Guy de Vito