Wednesday 17 August 2011

Different Types of Financial Crises

There are four types:

1) Sovereign debt / defaults: When a government fails to meet payments on its external or domestic debt, obligations or both

2) Banking: After heavy investment losses, banking panics or both

3) Exchange rate: Over valuation etc.

4) Inflation: High or negative as with Japan

Only one of these is enough to bring crisis and there are all of it in current one.