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What is a financial crisis ?


An economic system always creates value. Nature bound folks may be happy if they just create enough value to survive, More elaborated societies exchange goods and services, probably developing a sense for getting fair values for given values. Today it's common sense in most parts of the world to have money which is representing the value created by the economy. Goods and services can be bought by means of that money. A financial crisis may occur when the economy develops to the point when it's almost only driven by the money which is put into it. Two developments lead to that kind of crisis: Great loss of trust in the money's value (hyper-inflation), or a general loss of trust in lenders or loss of trust in other important participants in economy-driving money circulation. In the first case a rising lot of money circulates in economy but generates less value than before - less economic effect can be "financed". In the second case less loans or investments are given by money-owners so that money-circulation and economic value creation is reduced - less economic activity is "financed". In extreme cases like the world economy crisis of the 1930s the average people's standard of living sinks around the whole globe during a financial crisis.

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