Type of Financial Crisis

Types of financial crisis
Banking crisis
Main article: Bank run
When a brim suffers a sudden rush of withdrawals by depositors, this is cal lead a lodge run. Since situates lend out most of the cash they receive in deposits (see fractional-reserve jargoning), it is difficult for them to quickly pay back all deposits if these atomic number 18 suddenly demanded, so a run may chair the bank in bankruptcy, causing many depositors to lose their nest egg unless they are covered by deposit insurance. A item in which bank runs are far-flung is called a general banking crisis or just a banking panic. A situation without widespread bank runs, but in which banks are reluctant to lend, because they anxiety that they have insufficient funds available, is often called a citation crunch. In this way, the banks become an accelerator of a financial crisis.[5]
Examples of bank runs include the run on the Bank of the United States in 1931 and the run on Northern Rock in 2007. The yield of Bear Stearns in 2008 has also sometimes been called a bank run, even though Bear Stearns was an investment bank sooner than a commercial bank.
Banking crises generally occur after periods of uncivilized lending and heightened loan defaults.[6] The U.S. savings and loan crisis of the 1980s led to a credit crunch which is seen as a major(ip) factor in the U.S.



recession of 199091.
Speculative bubbles and crashes
Main articles: blood line merchandise crash and Bubble (economics)
Economists say that a financial asset (stock, for example) exhibits a bubble when its price exceeds the present take to be of the future income (such as interest or dividends) that would be genuine by owning it to maturity.[7] If most market participants buy the asset primarily in hopes of selling it later at a high price, instead of buying it for the income it will generate, this could be evidence that a bubble is present. If there is a bubble, there is also a risk of a crash in asset prices: market participants will go on buying only as long as they...If you want to get a bountiful essay, order it on our website: Ordercustompaper.com



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