Martial Law
A fiscal crisis has happened with regular intervals over the past century, it happens again in 2008, and in all likelihood can happen in the future in similarily. There's no fundamental differences between such crises in our time and former crises, except perhaps they occur faster, occur with greater regularity, but fortunately also heal faster.

Martial Law


The crisis often occurs after having a long time of economic growth, high employment and activity. The problem for companies and folks are generally the following:

- The economic activity within the whole society is extremely high following a long period of growth, but is starting to say no.

- Stocks are traded for historically high quotes after a any period of time of rise of 300% or maybe more, they've got reached an all time higher level, but they are beginning to decline again.

- The prizes of real estate properties are also high following a long time of growth, 300% or maybe more, but they also start to say no after an all time high level.

- Companies tend to be overestablished after aggressive investments for borrowed money. The investments have not yet shown profitable, however the companies estimate great profits from the investments simply because they think the general growth will continue uninterruptedly.

- Even the average folks have high debts after you have invested massively inside their homes plus luxury objects. They've got some beginning difficulties with payment on the debts, but think these complaints soon will go away having an anticipated further rises of non-public income.


The crisis normally has a slowly developing initial face. In this face the situation can reverse and the economy recover without great damages. Within this initial period it's possible to observe the following process:

- Steadily more companies understand that their massive investments don't pay back with all the expected revenues and they have problems paying on their loans. They abruptly reduce further investments and begin selling off assets.

- Steadily more individuals also realize these people have a too great debt to handle making use of their private income. They reduce their consume then sell off properties and luxury objects.

- Companies are getting steadily less orders, can sell less and also have less to accomplish as a result of reduced consume and investments.

- Earnings of companies and people are declining and lots of are downright loosing money.

- The stock exchange values are sharply declining, often 20-30%.

- The home prizes are sharply declining, often 20-30%.


At some time there might be a crucial turning point leading into the growth and development of a complete blown crisis that it is impossible to recuperate from in an easy way. This turning point is the place a specific persentage, as an example 10%, of individuals and firms understand that they don't have enough income to take care of their dept, understanding that selloff of properiies and stocks will not nullify the debt. The full-blown crisis has these properties:

- The activity and earnings of companies are abruptly declining.

- Many companies experience massive losses.

- The amount of companies and individuals with debt the issue here is abruptly rising.

- The amount of bakrupsies is abruptly rising.

- The unemployment level rises abruptly.

- Banks enter into serious squeeze because of customers struggling to pay on their debts and due to the decline in the value of properties in the role of to safeguard the loans.

- The troubled banks must rise the interest rates by many people percent to counteract the losses. But this act only raises the difficulties for other banks, individuals and firms and accelerates the crisis.

- A top area of the banks get unfunctional and bankrupt

- There will probably be massive selloffs of properties and stocks. The selloffs are exerted by individuals trying to free themselves from a few of their debts by banks trying to stop losses on loans.

- Trading stocks cracks down by an new 50% or maybe more driven through the massive selloffs.

- Real estate market also cracks down a new 50% or more because of massive selloffs, in fact somewhat slower compared to the stock trading game.


The ultimate stage of the crisis is seldom reached, as the governments will sooner or later take control of the financial systems and secure the absolute minimum functionality.

Within the ultimate crisis the creation of services and goods in the society has fallen 30% or even more and attempt to fall. Investments or building activities have totally halted. There is certainly mass unemployment, 30% or more.


The economic system has nearly totally collapsed, and it is only capable of supporting the daily payment for food, energy along with other necessities. The assembly facilities and organizations with the society have fallen apart 30% or maybe more because of not enough maintainance, meaning the society struggles to recover quickly.


Prior to the crisis can end, all selloffs to pay back on loans should be fulfilled. Then every actor in the society must accept their losses. Debts that actors are not able to pay back must in some manner be nullified. Then every one of the pieces remaining of the former companies should be fixed together again into new functional units. Then your society can slowly rebuild its strength.


An essential reason behind the crisis are over-optimistic companies and individuals through the foregoing period of economic growth. They have a tendency to believe how the general growth continues forever without interrupting periods of economic decline. They also tend to overestimate themselves and think they will be a success inside the competition against other programs or persons, not really a looser, not an average performer, nevertheless the winner.

This optimism, that is a general human property, make all actors borrow massive amounts of capital and invest them in homes, luxury objects and expansion of their business. This expansive behaviour tend to accelerate for a very long time untill in meets the wall.

Another cause are executives in banks tempted to lend out the maximum amount of money as you can for the borrowers, no matter the consequences for that bank and also the borrowers, since this behaviour provides the executives a massive short term personal gain.


Future crises are only able to be prevented by hindering financial institution lending out more money to anybody that the borrowers can pay back a snug way. This may simply be made by governmental regulations that set clear criteria that must definitely be fulfilled whenever a certain quantity of money is lent out.

Also banks must be forbidden to determine employment contracts for his or her executives that give them a break directly for your level of mortgages they establish.


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