Cases of Economic Collapse
There are few well documented cases of economic collapse. One of the best documented cases of collapse or near collapse is the Great Depression, the causes of which are still being debated.
"To understand the Great Depression is the Holy Grail of macroeconomics." —Ben Bernanke (1995)
Bernanke's comment addresses the difficulty of identifying specific causes when many factors may each have contributed to various extents.
Past economic collapses have had political as well as financial causes. Persistent trade deficits, wars, revolutions, famines and depletion of important resources have been listed as causes. Incompetent governments are another cause, especially when they go bankrupt and resort to money printing, causing hyperinflation.
In some cases blockades and embargoes caused severe hardships that could be considered economic collapse. In the U.S. the Embargo Act of 1807 forbade foreign trade with warring European nations, causing a severe depression in the heavily international trade dependent economy, especially in the shipping industry and port cities, ending a great boom. The Union blockade of the Confederate States of America severely damaged the South's plantation owners; however, the South had little economic development. The Blockade of Germany during WWI lead to starvation of hundreds of thousands of Germans but did not cause economic collapse, at least until the political turmoil and the hyperinflation that followed. For both the Confederacy and Weimar Germany, the cost of the war was worse than the blockade. Many Southern plantation owners had their bank accounts confiscated and also all had to free their slaves without compensation. The Germans had to make war reparations.
Following defeat in war the conquering country or faction may not accept paper currency of the vanquished, and the paper becomes worthless. (This was the situation of the Confederacy.) Government debt obligations, primarily bonds, are often restructured and sometimes become worthless. Therefore there is a tendency for the public to hold gold and silver during times of war or crisis.
Read more about this topic: Economic Collapse
Famous quotes containing the words cases of, cases, economic and/or collapse:
“In cases of defense ‘tis best to weigh
The enemy more mighty than he seems.”
—William Shakespeare (1564–1616)
“In the beautiful, man sets himself up as the standard of perfection; in select cases he worships himself in it.... Man believes that the world itself is filled with beauty—he forgets that it is he who has created it. He alone has bestowed beauty upon the world—alas! only a very human, an all too human, beauty.”
—Friedrich Nietzsche (1844–1900)
“I believe that history has shape, order, and meaning; that exceptional men, as much as economic forces, produce change; and that passé abstractions like beauty, nobility, and greatness have a shifting but continuing validity.”
—Camille Paglia (b. 1947)
“I confidently predict the collapse of capitalism and the beginning of history. Something will go wrong in the machinery that converts money into money, the banking system will collapse totally, and we will be left having to barter to stay alive. Those who can dig in their garden will have a better chance than the rest. I’ll be all right; I’ve got a few veg.”
—Margaret Drabble (b. 1939)