WHY A FINANCIAL CRISIS WILL ALWAYS BE AROUND THE CORNER

Abstract

This article seeks to explain the nature and main cause of financial crises. It starts by defining what a financial crisis is and then explains the roam types that have occurred over the centuries namely, currency crisis, banking crisis, and market crashes. The history of the financial industry is then explained to show that financial crisis is a recent phe­nomenon in relation to mankind which has been in existence for over two million years. What is highlighted is the fact that prior to the existence of financial industry, humanity has never experienced any financial crisis. They only began to occur when financial industry became established in the sixteenth century. The article then relates in detail some of the most famous financial crises that have occurred since then. They include the Tulip Ma­nia case, the South Sea Corporation panic and the Great Depression. This article concludes by arguing that financial crises at their core, are outcomes of over-lending and over-borrowing, which are, thus, integral to the financial industry itself, and that the problems of financial crises are not going to go away as long as the financial industry remains legally as part of our life.