The document discusses the recurring financial crises throughout history and their root causes in human behavior. It analyzes the Greek debt crisis in particular, tracing how unsustainable government spending, hidden borrowing, and a reliance on industries like tourism eventually led to a collapse when the global financial crisis struck. The document argues that human traits like greed, desire for power and consumption, indifference, and inability to curb short-term desires are ultimately responsible for periodic financial disasters. History seems destined to repeat itself due to inherent weaknesses in human psychology and decision-making.
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The great economic crisis in Greece: A journey to discover the Greek economic crisis that started in 2008 and alarmed the world. Its causes and implications
The document discusses the recurring financial crises throughout history and their root causes in human behavior. It analyzes the Greek debt crisis in particular, tracing how unsustainable government spending, hidden borrowing, and a reliance on industries like tourism eventually led to a collapse when the global financial crisis struck. The document argues that human traits like greed, desire for power and consumption, indifference, and inability to curb short-term desires are ultimately responsible for periodic financial disasters. History seems destined to repeat itself due to inherent weaknesses in human psychology and decision-making.
The document discusses the recurring financial crises throughout history and their root causes in human behavior. It analyzes the Greek debt crisis in particular, tracing how unsustainable government spending, hidden borrowing, and a reliance on industries like tourism eventually led to a collapse when the global financial crisis struck. The document argues that human traits like greed, desire for power and consumption, indifference, and inability to curb short-term desires are ultimately responsible for periodic financial disasters. History seems destined to repeat itself due to inherent weaknesses in human psychology and decision-making.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online from Scribd
The document discusses the recurring financial crises throughout history and their root causes in human behavior. It analyzes the Greek debt crisis in particular, tracing how unsustainable government spending, hidden borrowing, and a reliance on industries like tourism eventually led to a collapse when the global financial crisis struck. The document argues that human traits like greed, desire for power and consumption, indifference, and inability to curb short-term desires are ultimately responsible for periodic financial disasters. History seems destined to repeat itself due to inherent weaknesses in human psychology and decision-making.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online from Scribd
devastating financial crisis of the century occurred in 1929, which led to the Great Depression and since then, humans have been witness to many a crisis, and have managed to survive them all. Economists and other financial experts have outlined many a reason for these financial debacles. The irony is that despite many of the causes being similar, history tends to repeat itself and we are confronted with similar problems again and again. For example, after the Great Stock Market crash of 1929, one would have thought that people would learn their lessons and never repeat the same mistakes. Yet, a cursory glance of the history of the last 80 years shows that we have had many similar stock market crashes, and many of them occurring in the last few decades itself. So why is it that people fail to learn their lessons? Or is it that we choose to create such problems for ourselves? Many thinker and financial gurus have tried to answer the above questions, using their knowledge and expertise of the financial domain, but are unable to explain why such events should occur repeatedly and how to prevent their future occurrence. In my opinion, the answer cannot be arrived at simply through superficial financial analysis --- The problem is an intrinsic one, and would have to be investigated deep within the recesses of the human personality. The recent years have seen one crisis after another. The crash of the housing bubble in the US and the subsequent financial tsunami that spread across the globe, wreaking havoc in the financial markets, has made people rather jittery about the competence of the financial tsars of the modern world. Just when people started thinking that the worst was over, a small European country with a rich ancient heritage sent the alarm bells ringing to wake people up from their self imposed slumber of denial. The country in question, Greece, had never been heard of before in the context of the world economy, but in 2009-10, it became one of the most watched economies throughout the world. The issue assumed even more significance considering that the world had just been through one of the worst financial crises of the century and it sparked fears about the recovery pattern following the dangerous “W” curve ---- the economy coming out of recession for a while only to sink deeper into recession. Before discussing further, it would be prudent to analyse the context which nurtured the eastern European crisis and allowed it to escalate into such massive proportions. Since the last decade, the Greek economy has seen rapid growth, aided by huge foreign capital inflows into the country. The Govt. borrowed large amounts of capital to fund the public expenditure which was used as a means to keep the economy rolling and give an impression of prosperity. In fact, it is alleged that the Greek Govt paid huge sums of money to companies like Goldman Sachs to hide the details of their actual level of borrowing from the overseers of the European Union. For some time, there was indeed prosperity in the country --- people were living better off, wages were increasing, exports were on the rise, pension benefits for retired personnel were increased from an early age and tourists were flocking to the country and filling the national coffers. Greece was having a dream run; the best time ever since the restoration of its democracy. But as with any dream, one has to wake up one day and face reality. The global financial crisis brought a harsh end to this phase of tremendous economic growth. The two major industries of Greece, tourism and shipping were hit hard by the downturn. Investors began withdrawing their money from the markets and funds became scarce. The paralysis of the banking system and lack of credit stalled all developmental activities in the country and the economy began to stagnate. The increased wages of labourers which were brought about by the Govt. to showcase its concern for the welfare of the people returned to haunt the same Govt. as a Frankenstein. The increased wages had pushed up manufacturing costs which meant that the country’s exports were no longer competitive in the global markets. With exports down, and a global credit crunch stopping all activities, the economy began to slowdown. However, the unsustainable level of Govt. debt was inevitably going to raise its ugly head ---- And as anticipated, it did. The country woke up to a rude shock when credit rating agencies such as Standard and Poor’s, Moody’s and Fitch reduced the Govt. bonds to junk status --- which meant that the Greek Government would be unable to repay its debts in full. Hedge funds and speculators took advantage of the situation and made the situation worse, like a bunch of hyenas jumping in to snap up the remains of a carcass devoured by a lion. The crisis had by then reached huge proportions and threatened to bring down other countries as well with investors losing confidence in the European economies and withdrawing their money in large numbers. Had it not been for the bailioout, the economy would have collapsed by now. The complete picture of the situation is still not clear, as much of the recovery is still underway and thinking person would always be prepared to receive any rude shocks. What becomes amply clear from the above analysis of the Euro debt crisis is the fact that the human race is inherently impulsive. Investors, politicians, financial analysts and the common public lack financial prudence, emotional stability as well as integrity. Humans are selfish by nature, unwilling to work hard and lacking concern for others. Excessive consumption, living beyond one’s means and the desire to acquire more in less time have almost always been the root cause behind a financial crisis. Left to its own, the human population would turn the world into chaos and a state of anarchy would prevail. The evolution of the human being from a bunch of nomadic hunter-gatherers to the present day civilized being seems to have been incomplete, leaving behind remnants of the original mind-set of our forefathers in our minds. Perhaps that can help explain why we are interested in hoarding wealth when we know we cannot take it with us to the grave or why we consume excessively given the chance even when there is no apparent reason to do so. In the above case, the crisis was brought about by a combination of human greed, a quest for power and subsequent wooing of voters and simple indifference. So who are the culprits of the crisis? Firstly, the banking and monetary system, for not regulating the flow of money and giving into the illusion of prosperity and the desire to get high returns in short times; Secondly, the Government which tries to woo its voters with sops despite the clear knowledge of the unsustainability of such actions and its ill-effects on the country’s economy; Thirdly, the credit rating agencies which failed to call a spade a spade and added to the illusion of prosperity in the Euro zone region, especially in Greece; Fifthly, the investors and speculators who show a total lack of concern for others and try to make profits from others’ distress; and finally, the general population who cannot curb their consumerist tendencies even in the face of a crisis situation with total disregard for the other fellow-human beings residing in the world. These human traits are unlikely to go away easily, and as such, we are bound to see newer crises occurring at different times. This is like a self fulfilling prophecy ---- “History repeats itself”. The irony is, despite knowing our weaknesses, we are unable to change ourselves for the better. It is as the disciples say to Jesus in the Bible ---- “The Spirit is willing but the flesh is weak”.
The great economic crisis in Greece: A journey to discover the Greek economic crisis that started in 2008 and alarmed the world. Its causes and implications