Causes of Economic Crises
I recently read a book about economic crises written by a Christian. He seemed to argue that economic crises are caused by excessive debt and hyperinflation.
That is not quite right. In the past, hyperinflation was the cause of many crises. Now that the causes are understood, governments are more careful abut printing to much money. Of course there will always be situation where they have not alternative, like Zimbabwe.
The more important point is that hyperinflation is not the cause of the crises. It is usually the consequence of unwise government actions taken to deal with a crisis or shock. Weimar Germany got hyperinflation, because it lost a war and had impossible reparations imposed on it. Zimbabwe destroyed its agriculture by forcing out white farmers and giving the land to political loyalists who did not know how to farm it.
A whole range of things can cause economic crises and they can affect the economy through a variety for channels.
Nature | Agriculture | Industry | Tourism | Trade | Money System | Government |
Drought | Drought | Sabotage | Epidemic | War | Bank Failure | Excessive expenditure |
Earthquake | Disease | Fuel Shortage | Terrorism | Terrorism | Electronic sabotage | Building monuments |
Volcano | Price Collapse | Electricity burnout | Fuel Shortage | Electronic burnout | Excess Debt | |
Forest Fires | Collapse of trading nations | Sanctions | Boom and Bust | Excess controls, eg interest rates | ||
Storms | Shipping shortage | Printing Money | ||||
Violence and corruption | ||||||
War |