The Three Financial Calamities of The 21st Century


Published: June 15, 2021

Courtesy of A Depression For The 21st Century

fxempire.com

The 21st century has brought three financial crises unto its self. The first was the dot-com burst of 2000, the second was The Mortgage Crisis of 2007-2008, and the third is the 2019 pandemic that brought the world to its knees. As the writing of this blog, the United States is beginning to open up after 15 months of an economic downturn and businesses shut down by governmental intervention. But we will get back to this one later, but let us focus on the first financial calamity, the dot-com bubble.

The Dot-Com Bubble

So what is and what happened to cause the crash of the dot-com era? In 1989 Sir Tim Brenners-Lee developed the World Wide Web (WWW), and from this period to now, the World Wide Web is the connector of all computer systems in the world as a form or way of communication through the internet. Right here, let’s make a clear distinction of the difference between the internet and WWW. The internet is the connector of the global connection of computers that the web works.

In the 90s through fraud, and inappropriate activity from CEOs, and CFOs the manipulation of the stock market caused an artificial valuation of stock that cause the stock market a loss of $8 trillion in wealth in the 2000 dot-com bubble bursting, which brought it to be one of the three most extensive stock failures of all times. Another reason for the failure is that many tech companies that the investment bankers were financing had no business plan nor showed how to make a profit. Then there was internet availability, whereas only a few years earlier it did not exist. So everyone was trying to leverage the next best thing, which was the internet.

The value of NASDAQ grew from 1,000 points to five-fold in just five years to 5,000 points by 2000 from 1995. Money dumped into startups/IPO with the thought of making a killing on the stock market, with companies doubling the first day of trading new stocks. Then the bust. In thirty days (March 2000-April 30, 2000), 1 trillion dollars of valuation lost, or it evaporated. Thus, it took 15 years to recoup and bring back the $8 trillion in wealth lost in the 2000 dot-com downfall.

The Mortgage Crisis of 2007-2008

The second crisis I was intimately involved in was working as a manager in the mortgage industry when this one fell apart, and I never saw it coming. I assured myself this would never happen to me again. But, unfortunately, the State of Michigan refused to reissue my financial service industry license, so I had to recreate myself. So I went back to school to acquire my unfinished degrees in Business Administration. Ten years later, I had my Doctorate in Business Administration degree, focusing on Entrepreneurship and Business Management.
Armed with an MBA in Marketing and my Doctorate, I felt I had a better handle on my opportunities. According to Wharton, the crisis in the mortgage industry was due to the rush to lend money to individuals who had no way of repaying. However, from a practitioner’s standpoint, there was much greed as well. Financers were given big bucks to phantom projects, which lenders never checked out, and then the project was foreclosed after the project’s default.

Another catalyst of the mortgage crisis was the over usage of the sub-prime market. Whereas the dropping of traditional credit processes, like 20% down or a high down payment from the loan applicant to the current usage of no-money-down, and no income verification, helped in the demise of the mortgage crisis. Although it was a novel program promoted by the White House and the Bush administration, it turned out to be a defective program that fluctuated through the financial world and brought many to its knees and the collapse of others.

Covid-19-The Pandemic

Thus our current crisis-Covid-19. The U.S. and much of the world are trying to turn the corner on this disease. And get back to normalcy, but can this be achieved? Moreover, the governmental shut-down of non-essential organizations led to the lack of commerce has brought many countries to a lower GDP.  Thus, the natural flow of business, now ascending into an inflationary, needs to be checked by each government.

As the United States and other governments begin to reopen, the question remains: Can we ever get back to where we were preceding the pandemic? So many workers who had college degrees found themselves working from home, and those who did not have to continue coming into contact with people who may be carriers of the disease. Thus, has led to nearly 600,000 death here in America. Consequently, it led to being the worst deaths in the world.

One of the reasons the world is going back to work is the vaccines created to protect self and others from acquiring this disease. However, not everyone is returning to the workplace and is looking at reshaping their career goals and seeking additional training to change their current employment situation. Another is that the government here in the U.S. had stepped in to provide money to those families that would help not make life and death choices when it came to work and their families.

The restaurant and hospitality sectors were one of the hardest-hit industries, and now finding it hard to re-employ workers to staff this industry. With millions of workers laid off, the question remains how many will return to their prior work, and what changes these employers must make in the future? In addition, what of the businesses in this sector have shut their doors never to reopen again? What of them?

So, the question is, will we indeed return to the pre-pandemic era? Will entrepreneurs adjust as they usually do to deal with the shortfall of the current business dilemma? Will the public feel comfortable coming into contact with people and not knowing who has not vaccinated? Will this affect commerce and the interaction of people since we are social creatures?

Will there be another crisis in Seven years?

With the three latest crisis that has hit America, and abroad this millennium this equates to an average of every seven years extraordinary events happen. So what do pundits believe will be the next global event? What about a worldwide debt crisis? This debt crisis could very well draft that of the 2007-2008 mortgage crisis.

One pundit Dambisa Moyo, a global economic expert, and writer, who published several articles on chaos and why Democracy is failing to deliver financial growth, has predicted this could happen shortly. Her hypothesis, based on events before the pandemic, the world, paralyzed by too much debt. Thus, the example of the United States, whose debt ceiling has ridden over 100% since the pandemic and its GDP. Furthermore, this is the highest debt since 1946.

Then there are other debts such as credit cards, auto loans, student debt, and household has seen similar rises. Another area of concern it is estimated some 20% of U.S. corporation has become zombie companies which means they are bogged down with so much debt they are not able to develop a cash-flow that can service the interest on the debt and survived only to additional loans or another bailout tactic for the super-rich firms, that are considered too large to fail. Hence, looking at this from a global perspective, this same pattern is practiced worldwide. Thus, at a rate of 320% of the GDP of the world trade.

And another area that is so troubling is who holds the debt. China has come to be the most significant foreign lender not only to the United States but to others countries as well. Thus, it gives China considerable economic clout and stranglehold on how much the debtor nations push on other policies they see as preserving Democracy. The bigger picture if the United States were to default on this debt which would stifle it’s credibility worldwide, devastate the entire world economy.

These questions we will find out as the opening of businesses will occur throughout the world. We would love to hear from you on what you think this year will offer to commerce and your interaction in a post-pandemic era. Make your replies on the comment section of our blog, and above all, be safe and watch the crazies, for they are everywhere.
Dr. Dem

Who is Dr. Donald E. Mitchell:

Dr. Mitchell works as a Small Business
Consultant. He has offices in Southfield, MI,
Chicago, IL. His primary focus is on alternative
financing to small business organizations.

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