Black Swan: Economic Crises, Volume III

Table of Contents

1. Frontmatter

2. Introduction

   1. Frontmatter

   2. 1. General Overview of the Twenty-First Century’s Economic and Financial Crises

      Bernur Açıkgöz

      Abstract

      This chapter will discuss the economic and financial crises of the twenty-first century to better understand the new nature, volatility, and vulnerabilities of today's world economy. The twenty-first century has hosted many crises. Argentina, Dot-Com Bubble, Turkey, Global, Greece, Brazil, Europe, and Venezuela crises are the subject of this book, respectively. This section will provide an overview of all these crises. A complete understanding of these crises with their differences and similarities is very important to take precautions and fight against other ongoing and future crises.

3. The Financial, Fiscal, and Economic Crises in 21st-Century

   1. Frontmatter

   2. 2. Long-Term Descriptive Analysis of Argentina’s Economy and 2001 Argentine Economic Crisis in the Context of Argentina’s Economic Indicators and Public Finance Realizations

      Melih Kabayel

      Abstract

      In this study, the vulnerability of the Argentine economy until the 2001 Argentine Crisis will be discussed in a long-term perspective in light of other indicators and various studies. Argentina, an important South American country, has a developing economy. However, the political and economic crises it has been experiencing require that Argentina be analysed from various perspectives. In this context, this study analyses Argentina's economic, social, fiscal and political outlook from a cyclical perspective and reveals the economic and fiscal outcomes of the interdisciplinary relationship. The aim of the study is to evaluate Argentina's economic experience, especially in terms of fiscal policy and its derivatives, and to descriptively reveal the relationship of political preferences, democracy, and freedoms with finance.

   3. 3. Dot-Com Bubble

      Doğancan Akata

      Abstract

      The subject of the research is the Dot-Com bubble that occurred in the second half of the 1990s and had a major impact on the financial markets. The research aims to evaluate the reasons for the formation of the Dot-Com bubble and the consequences of the crisis it caused. The main line of the study is the definition of the Dot-Com bubble, the causes of the crisis, and the events that occurred after the crisis. The process covers a period in which a financial bubble burst in the late 1990s and early 2000s when the shares of internet-based companies became overvalued and the high valuations of these companies could not be realized. As a result of this period, many Internet-based companies went bankrupt and the markets entered the process of recession.

   4. 4. 2001 Financial Crisis in Turkey

      Yaprak Karadağ Duymazlar

      Abstract

      This chapter examines the causes of the 2001 Financial Crisis in Turkey and the solutions to the problems it created. In the 1990s and early 2000s, Turkey faced a confluence of problems, including high public deficits, unsustainable internal and external debt, hyperinflation, low growth due to high interest rates, banking sector risks, and political instability. These problems persisted for years, hindering Turkey’ ‘s economic recovery, and were exacerbated by external shocks such as the Russian Financial Crisis, the Southeast Asian Crisis, and natural disasters. In response, Turkey entered a stand-by arrangement with the International Monetary Fund (IMF) in 1999, which launched the disinflation program in 2000. Although the program showed positive developments in the first six months, it experienced setbacks in achieving its objectives, leading to negative market perceptions. The wave of panic that hit banks under the Savings Deposit Insurance Fund (TMSF) in November 2000 further exacerbated the banking sector's problems. Even with additional support from the IMF, market confidence remained elusive. Finally, political tensions at the State Security Summit in February 2001 triggered one of Turkey’s most significant financial crises. The stock market suffered record losses, the Treasury borrowed at exorbitant interest rates, and there were substantial foreign exchange outflows. The decision to move to a floating exchange rate regime, while an attempt to restore confidence, exacerbated existing tensions. To overcome these problems, Turkey adopted the IMF-supported Growth Enhancement Programme (GEGP). The GEGP enforced fiscal discipline, reduced public spending, improved tax collection and strengthened banking regulations. It also privatised state-owned enterprises, which encouraged competition and export growth. Implemented between 2002 and 2004, the GEGP transformed the Turkish economy, triggering rapid growth, increasing tax revenues, ensuring fiscal discipline and single-digit inflation.

   5. 5. 2008 Global Economic Crisis

      Alper Öztürk

      Abstract

      The purchasing conditions for housing loans have become easier, the housing market and mortgage market have grown due to the low interest-excess liquidity policy implemented by the USA since the early 2000s. As home purchases increased, housing prices rose, and with the increase in housing prices, home buying transformed into an investment tool. On the other hand, mortgage loans were converted into derivative financial products through securitization and these products were offered to national and international investors. Thus, the national mortgage market has turned into an international market. The use of careless loans in the mortgage market, which constitutes the financial sector of the housing market, insufficient supervision of lending institutions by supervisory and regulatory bodies, mistakes of credit rating agencies, and inadequate information of investors has led to the rapid growth of the housing sector and the mortgage market in a fragile manner at both national and international level. As of the end of 2006, housing prices started to decrease due to the saturation of the housing sector. FED tight monetary policy practices an interest rate increases caused repayment problems in the mortgage market, and for this reason, banks could not collect the loans they gave. Banks began to experience resource shortages due to their inability to collect the loans they gave, and this situation brought about the financial collapse of banks due to blockages in the financial system. In this context, the US mortgage crisis emerged as a national crisis. Due to the structure of the US mortgage market, the fact that this market includes international investors who purchase derivative financial products resulting from securitization, and the fact that the US is one of the world trade centers, the national crisis that emerged in the US mortgage market turned into a global economic crisis. To combat the effects of this crisis, precautionary policies have been announced at national and international levels. In this regard, efforts were made to reduce the effects of the crisis through monetary policy and fiscal policy practices. In this study, it is aimed to explain the 2008 global economic crisis with all its elements, starting from the national dimension and reaching the international dimension, and to reveal the process of combating the crisis. In this context, the study extensively discusses the causes, historical process, national and international impacts of the 2008 global economic crisis, as well as the national and international measures implemented in response to the crisis, and the dimensions of this crisis in Turkiye.

   6. 6. Greek Debt Crisis

      Yaprak Karadağ Duymazlar

      Abstract

      In this chapter, we examine the Greek Debt Crisis in the context of key economic and structural problems. The debt crisis erupted when Greece's manipulation of fiscal statistics was revealed, leading to a loss of confidence in the international markets. International organisations, Eurozone members and the Troika offered various financial aid packages to rescue Greece. These packages were conditional on the implementation of structural reforms, including austerity measures, public sector layoffs, wage cuts, higher tax rates, restructuring of the social security system and privatisation. However, these reforms triggered public protests and riots, plunging the country into chaos. This chapter provides an economic assessment of the challenges Greece faced in the complex process of implementing austerity and structural reforms amid social and political unrest.

   7. 7. Brazilian Crisis: Great Recession (2015–2016)

      Olcay Yılmaz

      Abstract

      In this study, the causes and the consequences of the unprecedented great recession experienced by Brazil were examined in the light of macroeconomic indicators which is the largest economy in Latin America and the eighth largest in the world. The combination of both internal and external economic and political reasons made the Great Recession inevitable. So that; Rousseff’s first term (2011–2014) she continued the anti-cyclical economic policies implemented by her predecessor Lula administration without slowing down, considering both demand and supply-side growth by offering tax exemptions, subsidies, low interest rates and social public expenditures within the scope of the new economic matrix plan. However, the transfer of the incentives offered to the companies that did not invest, the strong unionization and the increase in labor demand under the existence of a strict labor market, the bargaining power of the workers and the decrease in the profit rate expectations of the enterprises combined and the expected investments did not materialize. The increasing inflation pressure due to the existence of an unstable and constantly deficit budget, the lack of production that cannot meet the domestic demand and employment pushed Rousseff to implement austerity policies in her second term (2015–2016). In the same period, the arrests of the executives of Petrobras, the largest public oil company in Brazil, senior ministers and politicians for bribery and corruption by rigging public tenders, the dismissal of President Rousseff, who turned a blind eye to the corruption process and manipulated the figures to show the budget deficits low, considered to be one of the internal causes of the recession. Again in the same period, the astronomical fall in commodity prices, which account for 30% of Brazilian exports, and the decrease in Chinese demand are among the external causes of the great recession. When the results of the crisis are examined in the light of macroeconomic indicators, the Brazilian economy shrank by −3.54 and −3.24% in 2015 and 2016 for the first time in its 40-year economic history, and in terms of unemployment rates, Brazil experienced an increase in the first year of the recession 19% (from 7.8 to 9.3%) and 40% (from 9.3 to 13%) in its second year.

   8. 8. 2009–2019 European Debt Crisis

      Merve Dilara Boyner, Burhanettin Onur Kireçtepe, Bernur Açıkgöz

      Abstract

      The European Debt Crises, spanning from 2009 to 2019, marked a tumultuous period in the economic history of Europe. Beginning with the global financial crisis of 2008, several European countries found themselves grappling with unsustainable levels of sovereign debt, triggering a series of crises that reverberated across the continent and beyond. This abstract provides a concise overview of the key events, causes, consequences, and responses during this turbulent decade. The roots of the European Debt Crises can be traced back to factors such as lax fiscal policies, inadequate financial regulation, and the proliferation of complex financial instruments. Greece emerged as the epicenter of the crises, revealing the vulnerabilities inherent in the Eurozone's structure and raising questions about the viability of a monetary union without fiscal integration. Other countries, including Portugal, Ireland, Italy, and Spain, also faced significant challenges, exacerbating concerns about the stability of the Eurozone and the future of the European Union.

   9. 9. A Political, Economic and Humanitarian Crisis: Venezuela Crisis

      Olcay Yılmaz

      Abstract

      This study examines the causes and consequences of the political, economic, and humanitarian crisis that has unfolded and continues to unfold in Venezuela, in recent years, in light of macroeconomic and social indicators, a country with the world’s largest oil reserves. An analysis of the reasons behind the humanitarian crisis, focusing on the eras of Chávez and Maduro in chronological order, reveals several factors: the concentration of all power and key institutions in one hand by deviating from the principle of separation of powers, corruption and nepotism, the Dutch disease, increasing nationalizations and exclusion of the private sector, populist public spending without fiscal discipline, price controls and rigid currency policies. During the Chávez era, these negative factors were masked by high oil prices and the resultant abundance of foreign currency. The same approach continued and even intensified during the Maduro era; combined with a sudden drop in oil prices, the establishment of a constituent assembly that disregarded the election-winning national assembly, and international sanctions, these developments rendered the political, economic, and humanitarian crisis inevitable. An examination of the consequences of the crisis through macroeconomic and social indicators reveals deeper chaos: starting from 2014, Venezuela experienced consistent economic contraction each year, with three-digit inflation from 2015 onwards. By 2019, the country faced a 35% economic contraction, 10,000,000% hyperinflation, a 44.3% unemployment rate, and the migration of 4.6 million citizens (15% of the population), all indicative of a profound state of chaos.

4. Backmatter