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Economic Collapse Of Rome In The Fourth Century

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The Dependent Dominoes Did you know that economic collapses of countries have been dated back all the way to the fourth century? For example, the economic collapse of Rome in the fourth century. The problem that Rome suffered from with was an issue with their currency, gold coins, which contained more gold than was labeled. This caused rapid inflation because the citizens melted the coins to make a profit by selling the raw gold at a higher price. Another example is the economic downfall of the Spanish empire in the second half of the sixteenth century. Spain was rich off the gold of the newly found Americas, but started increasing mining to irrational levels which decreased the value of money and caused hyper-inflation which lead to their …show more content…

This epidemic is the spread of market downside from country to country and is a spill-over effect that is influenced by the agents’ four behaviors which are governments, financial institutions, investors, and borrowers. Financial contagion happens to both advanced economies and developing countries and causes financial volatility. It affects countries capital flows, exchange rates, and stock prices. The contagion contains problems such as irrational phenomena, macroeconomic shocks that cause local shocks passed through competitive devaluations, trade links, and financial …show more content…

An irrational phenomena in a financial contagion is built when co-movement occurs from the behaviors of investors that influence financial globalization which can be risk aversion, lack of confidence, and financial fears. A financial crisis that lasts two or more quarters is called a recession, while a longer or more severe recession is called a depression. One of the biggest impacts of a financial crisis are aimed at banks. During a financial crisis, people withdraw their money from banks due to their fear that the banks will lose their money. This is bad news for the banks for the obvious reason that they are losing money. If all goes bad and the banks use up all of their reserve money, they would have no choice but to liquidate their assets and file for loans once too many people start withdrawing, in order to pay back the people’s money. If a bank fails to return people’s money, they are forced to shut down. Now you may wonder why people are so scared of losing their money in a bank during an economical downfall. It is because the rest of the people who kept their money in the bank when it shut down only receive back up to 250,000 dollars if the bank is FDIC secured, which most banks are. Thus, if you have 900,000 dollars in your savings account and your bank shuts down, you will receive less than a third of your money. A financial crisis also leads the decline of

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