If we look into history of different countries we will find that different countries faced the financial crises at different times. As the world is facing now financial crisis now also, the question comes in mind that who are those who run this finance horse, what are the reasons which leads to financial crises? Or is there is someone who is holding all the strings and keep them pulling? So many questions come in mind when mind starts thinking about it.

Well I had searched about this and compiled these ten nasty crises. Check out these ten dramatic crises.

1 – Argentine economic crisis (1999 – 2002)

Argentinean economy was destabilized in 1980s when Latin American Crisis struck it. Argentine was an import dependent country where people usually convert their peso into dollars to feel secure. The high inflation rate leads its currency to lose the confidence and adding oil to fire the government that time spent generously on itself while ignoring the country’s crumbling industrial infrastructure.

Mexico and Brazil were the major trade partners of the Argentine in 1980s both countries suffered the economic crises which spread out in Latin America. Brazil’s currency was devalued in 1999 that damaged a lot Argentinean exports and adding fuel to fire the dollar was revalued giving a harsh blow to Argentinean Peso.

Till 1999 the country was having 3^rd consistent year of economic decline but the government haven’t devalued the peso, which made the crisis worse. In such conditions the investors ran on banks for dollars to send abroad for safety. Meanwhile the government freezes everyone’s bank accounts. This step of the government raised violence amongst citizens and protests through out country were started. The government was collapsed in 2001. While in crisis the people were bartering for goods because lack of cash, many people eked out a living by scavenging cardboard for recycling plants.

The new government 1^st tried to setup a third currency between dollar and peso but that failed. Then it instructed the banks to convert all dollars into pesos. That step worked and peso was lead to diminish in value. Because of that exports got higher and in meanwhile the government tightened its tax policies, improves social welfare, encourages business growth and put the reserve dollars up for sale in market. The country got the surplus trade because of its agricultural products anyhow its still struggling with inflation.

Lesson

Freezing bank accounts leads the crises to get worst. It can’t be a smart step to tackle the crisis.

2 – Russian Financial Crisis (1998)

The Russian government in 1993 introduced inflation-free short-term treasury bills known as GKOs to finance the country’s deficit. GKOs were traded on currency exchanges. Most of it was state owning while only 1/3 of funding came from foreign speculators who were attracted by high interest rates. Like a classic Ponzi scheme the government used proceeds from sales of new GKOs to payoff interest on matured bills.

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It is shown from Japan consumer price Index that their economy is moving towards deflation the overall sales show that the consumption of different commodities might not be supporting prices. The government has announced to pass a budget for 2009/10 probably on Friday. Government is facing immense pressure to spend more in order to stimulate consumer price index.

The main reason of this deflation is a slide in oil prices as the government makes efforts to pull out the country from deepening recession period.

There has been a larger fall in prices than what was expected in February retail sales that are yet another bad sign for the exports, as they are Japan’s main engine of growth.
Japanese inflation rate remains fixed in February, but economists warned that the country will face the deflation as soon as the global downturn hits demand at home and abroad.

In December the figure of the core Consumer Price Index (CPI) rises 0.2% but become flat in January, in this CPI the volatile fresh food prices were excluded. The CPI remains unchanged from a year earlier although it was expected that there would be a small drop.
Prices slid by 0.1 percent on per year basis in the “core-core” index, which excludes the fresh food and energy prices.

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Is the world heading toward a zero rate policy? This question is being asked by hundreds of economists and businessmen.  As evidence of deep recession is unfolding, bankers and economists are predicting that UK interest rates can hit zero any time now. The Bank of Japan’s decision to lower its key policy rate to 0.10 percent from 0.30 percent followed by US Federal Reserve Bank’s dramatic move is more proof to that fact that world is heading toward a global flat zero interest rate.

The Bank of Japan’s policy board voted 7-1 to cut the uncollateralized overnight call rate target from 0.3 percent. It was the second cut in less than two months. Japan’s interest rates have gone lower — they were effectively at zero from 2001 to 2006. TOMOKO A. HOSAKA of AFP reports

“The BOJ is in a similar situation to the Fed — the policy rate is down to a critical point, and policy conduct will inevitably shift to full-blooded quantitative easing,” said Tetsufumi Yamakawa, chief Japan economist for Goldman Sachs.

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The United States Federal Reserve says it will use “all available tools” to restart economic growth. The central bank’s main interest rate is now the lowest in its history. This week the Fed cut its target rate of one percent for overnight loans between banks to a target range of zero to one-fourth of one percent. The Fed based its decision on weakening economic conditions.

Federal Reserve in Washington

Americans have decreased their spending every month since July — the longest period in at least sixteen years. Unemployment grew to six and seven-tenths percent in November — the highest in fifteen years.

This week’s cut in the federal funds rate was larger than many economists had expected. The Fed also cut its rate for direct loans to banks. And it began paying interest on balances held in the Federal Reserve System.

In the past, cutting rates has been a powerful tool to lift the economy. But President-elect Barack Obama says it is not enough this time.

BARACK OBAMA: “We’re running out of traditional ammunition that’s used in a recession, which is to lower interest rates. They’re getting to be as low as they can go.”

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