Question

What is the typical pattern for a financial crisis? 500 words

Answer 1

The typical patterns for financial crises are:

1. Stock prices and capital market moving up exorbitantly as it took place in 2008. The stock prices rose very fast and most economists felt it’s not right for stock prices to move that fast

2. They are preceded by economic action that is noticeably weak.

3. Before the emergency everybody wants the unsustainable activity to prolong so they either ignore it or have several reasons to describe why it is sustainable.

4. The precise timing of the crisis event is rapid and volatile.

5. Once the crisis happens you cannot put things back the way they were.

6. We look at the rear view mirror and conclude that major parts of the economy were unsustainable and wonder why no one did anything to bring it to an end.