Long depression of 1873

The Long depression was the first worldwide economic crisis, which happened in 1873. It began with a building boom in Europe, with massive construction levels taking place in Vienna, Paris and Berlin. In the United States the economy was also over-expanded, particularly in railroad construction. But after the Civil War the country needed rebuilding, therefore housing and construction levels grew quickly. Railroads were built at a record rate and everybody considered that this era of prosperity will never end. The idea of growth was destroyed in 1873, with stock market crash which started the Long Depression. The weak link turned out to be Jay Cooke and Company, a large and respected banking house. Cooke had played a large role in financing the Union war effort by marketing federal bonds to farmers and workers. After the war, the company had become the government's agent in financing railroad construction. However, one wrong decision regarding Northern Pacific Railway caused the demise of the banking house and started a nationwide depression. Read more about the Long Depression here...

The Great Sparrow - part II

The scientists had autopsied the digestive systems of dead sparrows and found that most of the contents were harmful insects and just a tiny fraction was human food. All the evidence suggested a sparrow was actually a beneficial bird for humans. By April 1960, Chinese leaders realized that sparrows also ate a large amount of insects when rice yields after the campaign were substantially decreased due to the increase of insects. Chairman Mao ordered the end of the campaign against sparrows, replacing them with bedbugs. However, it was already too late. With no sparrows to eat the locust populations, the country was soon swarmed. During the crisis an estimated two billion sparrows throughout the China had fallen. Read more about the Great Sparrow campaign...

The Great Sparrow

Over fifty years ago China faced a cultural revolution, when Chairman Mao Zedongwith changed economy focus to heavy industry. A radical socialist campaign called the Great Leap Forward was designed to mobilize the country's vast rural peasantry. It included a massive series of plans designed to achieve rapid increases in China's industrial production. The main goal for China was to catch up with the United States and England. Before that time, China had been a mostly agrarian society. At the beginning the amount of crops and cotton was doubled. This initial success in 1958 led to ambitious goals for 1959 but the weather didn't cooperate. Fewer crops were harvested, rural officials overstated the amount of grain for fear of not meeting their quotas creating imbalance in the system. Result was Four Pests campaign in order to exterminate mosquitoes, flies, rats, and sparrows. Read more about the campaign here.

The Aral Sea problem - part II

In the Soviet Union massive amounts of water were diverted for irrigation of cotton and the lake suddenly began to shrink dramatically. Soviet planners found cotton to be the perfect candidate for export in the Aral Sea region, being often refered to as white gold. The Kara Kum Canal opened in 1956, diverting more water from the Amu Darya into the desert of Turkmenistan and millions of hectares of land came under irrigation after 1960. The entire region's once prosperous fishing industry has been essentially destroyed, bringing unemployment and economic hardship. By the 1980s commercial fish was eliminated entirely, which in effect shut down over 60,000 jobs. In addition to the water problem, the soil also became contaminated because of the large amount of pesticides used and biological weapons tests conducted on the site. Read more about the disaster consequences here.

The Aral Sea problem

The Aral Sea is definitely one of the greatest environmental crises ever recorded. People have used the waters of the Aral Sea for thousands of years, borrowing it from two major nearby rivers. The first is Amu Darya, which flows into the Aral Sea from the south and the second is Syr Darya, which reaches the sea at its north end. Aral Sea is one of less than 20 ancient lakes in the world, estimated over 5 million years of age. The lake is located between Kazakhstan in the north and Karakalpakstan, an autonomous region of Uzbekistan. When you see a massive desert in the pictures, one can hardly believe that was the location of once one of the four largest lakes in the world with an area of 68,000 square km (26,300 sq mi). The water level has been steadily shrinking since the 1960s after the rivers that fed it were diverted by Soviet Union irrigation projects. By 2007 it had declined to 10% of its original size, splitting into smaller lakes. In the meantime, salinity has increased fourfold. Read more about the Aral Sea disaster.

Argentina economy crisis - part III

The macroeconomic consequences of the crisis were severe. Real GDP fell around 11% in 2002, bringing the cumulative decline since 1998 to almost 20%. The unemployment rate soared at nearly 25% and Argentina experienced a total economic meltdown. People were rioting on the streets, until President Eduardo Duhalde finally managed to stabilize the situation. The confirmation of the debt moratorium and announcing the end of the convertibility regime proved as only temporary fix. In 2003, President Néstor Kirchner was elected and still had a crisis cosnequences to deal with. But the economic outlook was completely different then before since the devalued peso made Argentine exports cheap and competitive abroad. Read more about the crisis aftermath here...

Argentina economy crisis - part II

Following advice from the IMF, political decisions lead to a law which restored the peso instead of austral, keeping the value fixed at one dollar equaling one peso and both currencies easily convertible. The convertibility law resulted with a sharp drop in inflation, restored price stability and preserved the value of the national currency. During the 1990's Argentina economic boom was considered a great success. But in 2001, the Argentina was no longer able to meet the debt payments. The government declared a default on the larger part of the public debt, in total of more than $132 billion. People began to fear the worst and started withdrawing large amounts of money from their bank accounts, simultaneously turning pesos into dollars. Most of the money was sent abroad, while many more bank runs took place in homeland. Read more about the Argentina economic crisis...

Argentina economy crisis - part I

Just ten years ago, Argentina shook the world with a national debt default after which an unprecedented economic crisis followed. In the period from 1976 until 1983 the National Reorganization Process occurred and amassing a huge national debt took place. The money gathered on the international markets was spent in numerous dubious projects and the nationalization of private debts. The Falklands War also took a toll on the unstable economy at the time, further increasing the national debt. In 1983, the election of President Raúl Alfonsín restored democracy in the country. His government planned to stabilize economy with the creation of a new currency called the austral. Hoever, the presidents plan had many faults, since the new currency didn’t actually change the poor economical structure. When Argentina became unable to pay the interest of national debt consequently the confidence in the austral currency collapsed. Inflation spiraled out of control reaching in July 1989 levels over 200%. Read more about the Argentina economy crisis...

Panic of 1857

The Panic of 1857 occurred after a loss of confidence in an Ohio bank and subsequently spread as railroads failed. Railroad speculation was high and the crisis made the people pay for their unwise and greed-driven decisions. On August 24, 1857, the New York branch of the Ohio Life Insurance and Trust Company failed due to the massive embezzlement spreading panic as the confidence in banks was slowly disappearing. Soon nationwide banks began to collapse and a severe economic depression in the United States started. Many people lost their jobs and massive protests followed. Adding to the troubles of the banks, the sailing ship full of gold was lost in the hurricane and sank to the bottom of the ocean. With their failed investments in railroad and land, it was impossible for the banks to gather all the gold their customers demanded. Read more about the Panic of 1857 here.

South Sea Company bubble

In the 1700s, the British Empire was the strongest force on the entire globe. The British South Sea Company was formed in 1711 and is considered as a prime example of a speculative bubble. The company was promised a monopoly on trade to the Spanish colonies and the prospect of exclusive rights to trade with new wealthy countries easily attracted more and more investors. Prices of shares spiked in January of 1720, from a modest £128 to £175 in February. With investor confidence mounting, the share price climbed to approximately £330 by the end of March. Speculation drove the price higher around £550 in May. When the South Sea company received the government charter by the end of June, which investors view as a vote of confidence in the company share price skyrocketed at £1050. And then came the collosal price fall that ruined hundreds of people and caused a nationwide crisis. Read more about the South Sea bubble here.

Dot-com bubble

The dot-com bubble was a speculative bubble covering the period between 1995 and 2000. The bubble was a global phenomenon, which involved many international banks, mutual funds, venture capital, private investors from all over the world. Since public use of the Internet expanded rapidly over the years, Internet business seemed as an infinite source of profit and opportunity. Therefore a group of new purely Internet based companies commonly referred as dot-com emerged. New business paradigm suggested that the survival of the internet company depends on expanding its customer base as rapidly as possible, regardless of the financial result. For example, Google and Amazon did not see any profit in their first years. Amazon was spending money on expanding customer base and advertising and Google using the funds to create a more powerful search engine machine. These are, however, the shining examples. Many failures include NorthPoint Communications, Global Crossing, JDS Uniphase, XO Communications, and Covad Communications. Companies that produced network equipment such as Nortel, Cisco and Corning were at a disadvantage and also failed miserably. Read more about the dot-com bubble.