What are the causes of economic crisis?

Answer 1

In general economic crises are caused by economic issues which grow so large that they start impacting other areas outside of economics.

In terms of what caused the most recent global economic crisis

• The collapse of the sub-prime mortgage market.

  The sub-prime mortgage market collapsed due to too many people defaulting on their mortgages. This was in turn caused by several factors including general weakness in the markets as well. The initial collapse caused other people to have to call in debts. However, debtors relied on these excessively high valuations in order to leverage themselves.

• General weakness in the markets
• Prime Minister of Bhutan Jigme Yoser Thinley blamed the global economic crisis on "insatiable human greed".
• The growing sense of entitlement and lack of willingness to sacrifice.
• Mathematical Complexity of the markets. This allows some financial institutions to behave as leeches on the market without actually contributing to overall productivity. This also prevents government regulations from being written to stop these actions, as they are not easily understood by legislators. Further, lobbyists can usually stop such actions from taking place.
• Continued Government Spending. The failure of most governments to reign in spending, and instead continuing to print money to compensate for deficits contributes to overall weakness of the dollar and the market.
• Decreased financial regulation in particular areas. Whenever there is decreased financial regulation in a particular area, companies jump into these niches to squeeze out profit.
• Excessive financial leveraging which did not take into account proper risks.

Answer 2

There are many factors that cause global economic crisis. If one believes in free markets then, it is said that institutional polices that attempt to exploit the market can cause serious fluctuations on the global scale. According to most "free market" theorists, the market is an exchange between two constituents, who agree on a price without of need of an "arbitrary agent". This creates a natural supply and demand defined by their agreed price. The situation that occurs is that this model is affected by economic events such as weather, availability of resources, institutional policies and technology, which all can be either positive or negative. For the case in point, let's say that there is an arbitrary agent who decides to charge a fee for conducting an exchange for six individuals (this example could be substituted for any of the mentioned economic events uniquely affecting the price). Each of the three pairs would have a supplier and consumer. Let us also suppose that 2 out of the 3 pairs can afford to do business but one of them cannot due to this fee. This would thus create an inefficient market. On a global context, if we were to have this model to represent the sum of all markets, the 2 pairs that can afford to do business would be all functioning markets and the one that cannot would be the market failures influenced by the arbitrary agent which can be viewed as all ineffective economic policies. In a sense, a global economic crisis is the occurance of market inefficiencies due to economic events. I hope this answers your question.

Answer 3

People and governments in the developed world spent more than they were earning and thus built up debts which they now can not pay. It is the people who did not do this that are now suffering?!

Answer 4

Inflation and the natural boom-bust cycle of capitalism.

Answer 5

foreclosue, greedy bankers. mostly greedy bankers.

Answer 6

Bush