Economic Collapse

Economic collapse or economic meltdown refers to a prolonged financial crisis ranging from a few years to many decades. It is backed by social turmoil, civil chaos, and a breach of public order. Moreover, the world economic collapse might bring widespread panic, and thereby, suitable preparation for survival may come in handy.

Its immensity can certainly decelerate the governmental intervention procedure for economic revival, thus creating serious economic disorganization. Furthermore, the Russian financial crisis in 1998 and the Argentine great depression of 1998-2002 are two prominent instances of economic meltdown.

• Economic collapse is the continued disintegration of the national or regional economy for a long duration, followed by a recession or financial crisis.
• It is normally caused due to stock market crash, hyperinflation, or stagflation. Moreover, economic recession and economic collapse are two different terms.
• The two famous economic meltdown examples are the Russian financial crisis (1998) and the Argentine great depression (1998-2002).
• Its effects incorporate widespread panic, surged interest rates, possible unavailability of electricity and water, bank closures, increased debt defaults, and inclination toward other currencies.

Economic collapse is attributed to the sovereign debt crisis, magnified interest rates, local currency crisis, and global currency crisis. It certainly induces lost credit access, bank closings, demand exceeding supply, potential inaccessibility of electricity and water, and burgeoning interest rates.

The US economic collapse is improbable since the administration has all the preparations in place to avert such a catastrophe. Above all, the US federal government possesses numerous supplies and equipment to hinder a financial crisis. Please note that economic crisis and collapse are two distinct situations. An economic or financial crisis conveys a dramatic decline in the financial state of a region or nation. On the other hand, the world economic collapse symbolizes an extended period of a fiscal breakdown requiring major official changes for its survival. The government may write off debts to handle this type of situation.

In the same vein, the following are some real-life incidents of the former:

1. The credit crisis (1772)
2. The great depression (1929-39)
3. The Organization of the Petroleum Exporting Countries (OPEC) oil Price shock (1973)
4. The recession of 1981-82
5. The savings and loan crisis (1989)
6. The Asian crisis (1997)
7. The recession post 9/11 (2003)
8. The financial crisis (2007-08)
9. Coronavirus pandemic (March 2020 and continuing)

To clarify, let’s check the crucial sources of world economic collapse:

#1 - Stagflation

It indicates a sluggish economic growth rate accompanied by higher unemployment and inflation. Moreover, the economic phenomenon puzzles legislators as safety measures for inflation might soar the unemployment rate.

#2 - Hyperinflation

Hyperinflation specifies quick and uncontrolled price increments (generally above 50%) within an economy throughout a stipulated period. As a result, it dissolves the currency's value, preventing taxpayers from acquiring even an essential commodity or service.

#3 - Stock Market Crash

It is a social phenomenon denoting an immediate steep decline (mostly double-digit reduction) in stock rates. Additionally, this generates a bear market extracting money out of firms. The stock market crash happens after an extended period of surging stock quotes.

Now, here are some instances for better comprehension.

Example #1

1998: Russian Financial Crisis

The Russian government devalued its official currency ruble on 17 August 1998. Additionally, it declared a coercive re-arrangement of the ruble debt liabilities falling owing to the end of 1999, whose face value was $45 billion at the pre-crisis exchange rate.

The administration also declared a 90-day ban on private external debt payments and short positions upon margin calls and currency forwards on repo operations. The move helped in the economic collapse preparation for commercial banks under extreme governmental debt.

1998-2002: Argentine Great Depression

Argentina suffered a 4-year-long great depression period in 1998, resulting in an economic shrinkage of 28%. Moreover, the major reason behind this situation was unimpressive financial regulations. Three huge tax increments in 2000-2001 inhibited growth and interference with financial management in mid-2001 generated a currency devaluation threat.

Example #2

On 15 May 2022, Lebanon conducted the first parliamentary election after its economic collapse in 2018. It achieved economic collapse survival that occurred following a big explosion in 2020 at Beirut’s port.

The collapse marked the country’s most damaging crisis since the civil war in 1970-75, leading to a currency deterioration of over 90%. Furthermore, it surged three-quarters of the populace into poverty and restricted savers of bank deposits. As per interior ministry statistics, the voting turnout was 41%, disregarding 60 of 1752 polling stations, inferring decreased participation than in 2018 (50%).

The impact of world economic collapse includes:

1. Plunging demand for the dollar and US Treasurys
2. Soaring interest rates
3. The inclination toward other currencies such as the euro, yuan, or also gold
4. Hyperinflation due to the loss of currency’s value
5. Lost access to credit
6. Shutdown of banks
7. Unparalleled demand oversupply of even the necessities like gas, food, and other essentials
8. Prospective unavailability of electricity and water, if meltdown influences local leaderships and utilities
9. Widespread panic
10. The collapse of the financial market and increased debt defaults

This has been a guide to Economic Collapse and its Meaning. Here we discuss world economic collapse, its causes, effects, & preparation methods for survival. You can learn more from the following articles –

• Crack Spread
• Grexit
• Economic Risk Meaning
• Examples of Economics