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Collapse of the Soviet Union and Emergence of Oligarchs

Conditions during the fall of the USSR

Boris Yelstin seizes


power in Russia by Political Instability
Planned EconomyPrice
ending the Soviet Union and Resource Control
Gorbachev’s Reforms •Hardcore communists were Oligarchs firmly establish
failed to transform the trying to regain power
themselves as a major
had caused economic
economy
growth to collapse power centre in the
Russian economy
New Govt inexperienced
in privatization –
Missteps such as
vouchers
Yelstin needed funds for Oligarch’s for elections
Privatization of
Oligarchs gain concentration of
Battle for control of Oligarchs back resources in hands of
control of Economy is
economic resources Yelstin against Oligarchs due to
resources by controlled by few
between Oligarchs and communist party
political influence government corruption
Communist company
directors
Greece Crisis
ECB and Greece Greece is forced to implement reforms
and reduce government spending
Greece government’s ECB sets interest rates causing higher unemployment and
budget deficit did not for all the Eurozone reduced social spending and creating
meet Eurozone limits countries a recession and hence even lower
government revenue

Greece cannot change Greece has access to


interest rates so it cannot low cost funds but cannot
stimulate growth through control the interest rates
exports Greece pays of existing
debt with bailout funds
but has less funds Germany has
leading to less lent extensively
Political pressure government spending to other
on Greece to Greece has access to low cost Eurozone
reduce deficit funds but cannot control the countries and is
and debt to interest rates to allow inflation to a major creditor
comply with lower real value of debt it owes of Greece
Eurozone reqt.
IMF, ECB and European Germany has a high surplus but as the
Greece announces it Euro follows the overall Eurozone it’s
2009 it has been Commission provide
Greece with a bailout but exchange rate is lower than it should be.
understating deficit since Greece’s exit could cause the Euro to fail
many years one that requires
austerity and create instability
Causes of the Great Depression

Economic Aftermath of World War 1


Germany was being
Europe was suffering made to pay large
from the after effects of amount of war debt
World War I causing the German
economy to be weak
US Economy expanded
rapidly in the 1920’s but US economy was
demand did not rise at
USA had emerged as a
major creditor nation
primed to produce more Poor global outlook and
with the coming back of
same level after World War I
soldiers
lower consumption
resulted in an economic
depression in the US
Gold standard was economy
reintroduced for
People purchased shares international trade
even using Loans as they
believed in growth potential
even while demand was less
High interest rates
The US fed raised caused borrower
Consumers, fearful of interest rates to countries to reduce
As demand fell in 1928, bank solvency spending causing
panic selling of stocks maintain the gold
withdrew their money standard causing a recession there. Tariffs
set in leading to a stock and consumption on imported goods also
market crash reduced money
further fell supply effected Europe
NAFTA, 1988-94 Latin American countries
already impacted by debt
US corporations crisis especially Mexico
look to profit from
access to new Mexico agrees to Free
markets and Trade Agreement with
President HW cheaper labour USA. At that point of time
Bush ends cold
Mexican tariffs on US
war rivalry and
goods were 250% higher
looks to
than US tariffs
promote free NAFTA
trade agreement of
1992 reached
President Bill
Clinton elected and
Agreement is
emerges as a
finally ratified by
propagator of free
the Senate and
trade Canada also looks to
comes into effect
in 1994 profit from Free Trade
Agreement and gain
from the treaty between
Mexico and North
America
Battle of Seattle,1999

Free trade has


resulted in loss of Inside the area
WTO police form
jobs in the USA Ministerial protective cordon
Conference
1999 is a Police presence
Globalization had failure and around centre is high
ignored preserving unable to
human rights achieve Outside the area,
anything Police look to
substantial break up protests
A loose coalition of
NGO’s , workers,
human right Police use rubber
workers, farmers etc bullets, tear gas etc
decided to protest to break up protests
globalization and some protestors
respond by throwing
bottles
How Deng Xiaoping’s Rural Reforms in China happened
Communist Party is in power

China Food Crisis Deng Xiaoping heard


about Xiaogang and
Food Shortage in decided to establish
China due to Mao’s same system
actions

China had a rapidly


going population

Xiaogang Village
experienced a severe
draught in 1978 and
Agriculture Sector decided to experiment
Household
People’s Commune: Common wherein people were
Responsibility
production unit in the area free to plant and raise as
System is introduced
created by Mao but a failiure many animals they liked
across China and is a
to though land still
success
belonged to state
How Quantitative Easing works
Open Market Operations
Banks & Other Financial Institutions
Central Bank of a lend to both governments and

Economy
country controls the corporate borrowers
flow of money by
controlling interest Government Corporate
rates and also Bonds Bonds
financing
government bonds

Excess Reserves
Money is available in
the market for
financial purposes
Government can
crowd out corporate
Money availability borrowers by
stimulates consumption and borrowing most
investment available funds
How subprime crisis caused a recession in USA?
Housing Market in USA
Less money to
Easy availability of money as Fed lend causes lesser
held interest rates at near zero Economic activity investment and
levels decreases and consumer
unemployment spending also
rises causing decreases
further fall in
Banks lead aggressively to home prices and a
owners and construction recession starts
companies as housing prices soar

High inventory causes fall in house Bank incur losses


prices and buyers walk away rather and have less
than pay mortgages funds to lend and
Value of Mortgage
Backed Securities
decreases and the
More houses on market cause bubble bursts
price crash
Asian Financial Crisis
Conditions Preceding the Crisis
US Fed decides to
Currencies like Banks have
High levels of FDI raise interest rates
Thai Bhat have sovereign to combat inflation
in the Asian Tiger
fixed exchange guarantee In many in USA due to which
economies
rates countries exports from Asian
Tigers became
expensive

IMF bails out the


countries but with
strict loan
Banks lend to risky projects agreements
and investment and
consumption is high

Currency traders High inflation in the


attack Thai Bhat as economies due to
Excess capacity is built they realize the
up in the economy devaluation causes
exchange rate is not economic slowdown
sustainable
How Zombie companies got created in Japan?
Restrictions on bank Increase in home and
lending are removed and land prices as banks
Japan grows at record rates
Japanese banks try to aggressively pursue
in the 1970’s
recoup profits by lending individuals and
to individuals corporates

Japanese Corporations Japanese


establish themselves conservationism and
globally and export led government policy did
growth occurs not allow banks to get
rid of non performing
assets causing advent
of zombie firms
Japanese banks have
Japanese central bank Plaza accord causes
restrictions which
raises intrest rates in 1989 the Yen to strengthen
guarantee them profits but
to burst the housing bubble against the dollar and
make the industry less
but causes a slowdown makes exports less
competitive
competitive

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