The dot-com bubble (1995 – 2000)

A new type business came out into view in the mid-1990s, The .com, a company based on the Web or servicing the internet, its people and its technology. In beginning when dot com stock values shot skyward venture capitalists  started all together to finance Internet startup 

As there was no certain business plan of dot com that can stop many VCs from investing in it. While investors and startup executives thought that the .com would gain the attention of people they will get back the reward for their investments. 

Speculators crawled in making a market full of wildly overvalued startups, spending so much on gigantic publicity campaigns followed. dot com burned through their VC money with hope that it will come back soon. Day trading became relatively common way to make fast money. 

Though the government hasn’t paid attention to .com startups or speculation, its policies and timing mightily contributed to a loss of confidence. Between 1999-2000 interest rates were raise six times to prevail the economy and in meantime a flurry of government investigations stalled corrupt business practices. 

For example as the NASDAQ began its slide, Microsoft was declared a monopoly. Main telecommunication companies like MCI Worldcom was fall in heavy debt and management scandals. Regulators put the financial industry under fire for misleading investors during the .com boom and famous Enron was collapsed when the investigators found out an accounting scandal. 

In 2002 the Sarbanes-Oxely Act was passed out having unyielding transparency and accountability standards for public companies. 

Lesson 

The market always welcomes new technology but on long run it become harsh giving you a hard blow of losing assets.

 

East Asian Financial Crisis, 1997

The so-called “Asian economic miracle” turned disastrous in July 1997 when investors did what they do so well: lost confidence, particularly in currencies. High-yield rates made Asian markets appealing, but when the U.S. tried to stem its own recession by lowering interest rates, it made itself more attractive and, as a consequence, the Asian markets looked too risky.  

A domino effect followed, beginning in Thailand and spreading through the Philippines, Hong Kong, Indonesia, Malaysia, and beyond, triggering an unprecedented global crisis. Asian markets that had enjoyed some rare prosperity were slammed: Thailand dipped 75%, Hong Kong’s HSI went down 23% and Singapore dropped 60%.

 

Not a single global market went untouched.

Financial crisis of the past

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.crisis-recession-global-financial. Well I had searched about this and compiled these ten nasty crises. Check out these ten dramatic crises 

Asian Financial Crisis (1997 – 1999)

South East Asia was a hot international investment destination during 1997-1999. The high short-term interest rates of ASEAN countries given foreign investors favorable rates that made the fluent capital flow of in the region. 

In the early 1990sthe growth rates were so high as 12% of GDP, and assets prices were increased also, leading analysts refers it as a remarkable thing as “Asian Tigers” and “Asian Economic Miracle”. 

In meantime Thailand, South Korea and Indonesia were having huge deficits for that these countries borrowed quite a bit of money externally keeping their own interest rates fixed which at end lead them to damage in foreign markets. 

In early 1990s foreign investors turned out from Asia as higher U.S, interest rates made dollar value high, this affected South East Asia’s exports as their currencies were pegged with the U.S. dollar, so in result they lost their exports competitiveness. By the beginning of 1996 South East Asian exports were slowed down, at least it was fueled by China’s increased competitiveness in the export market. 

What were the causes of that crisis? Some say that it was because of the policies leading to large amounts of credit pushing up asset prices which collapsed then which lead to a massive debt defaults (kind of like the sub prime crisis). 

The foreign investors got the infectious fear so they pulled out their investments. To hold the region attractive for foreign investors ASEAN governments pulled up their interest rates and bought up excess domestic money using foreign reserves. Which lead the government’s central banks run short of foreign reserves and on other hand capital was still flying out from the region. 

Thailand’s government floated the bath in 1997 to engage the Asian Financial Crisis. Regional currencies depreciated making liabilities in terms of foreign currency more expensive in domestic terms. It melted down the whole economic sectors and people felt into poverty. Stock markets crashed down and currencies devalued. That led to the political destabilization with so many executive resignations and increase in extremist groups. 

The International Monetary Fund made bailout packages stating removal of faults in exchange for debt defaults. In these reforms government expenses were cut down, allowing banks to fail, raising interest rates and becoming more transparent. 

So far the results of the IMF’s actions are doubtful for reaction against powerful international NGOs that continues today. According to some analysts Asian crisis had also contributed to the recent United States housing bubble. 

Lesson 

In crisis if rich people interfere offering their money in exchange for an agenda that not for sure always their agenda will work or will be having any useful results. Financial meltdowns can happen with blink of an eye.