Every time it seems like we are out of a financial crisis, we face another.

Remember back in 2008 when the housing bubble burst, millions of people lost their jobs,

homes, and everything else.

The European Union spent the next5 years trying to recover.

In fact, countries such as Greece just recently recovered from the 2008 crisis, and yet here

we are in the middle of another crisis.

But if you watch our videos, you know that a crisis is an opportunity to build a fortune,

and we have taken a look into some of them in previous videos.

But to take advantage of a crisis, you need to be able to spot them before everyone else

does and get yourself ready, and that's what we will do in this video.

We will take a look at five greatest financial crises in modern history to understand why

they happened, How they happen, and How did we recover from them.

So let's start with the first one. 


 The Panic of 1907


 The United States wasn't always such great

financial power.

Back in the 19th, it was a country of turmoil.

The civil war almost destroyed the country, and its financial market wasn't working properly.

The US didn't even have a Central Bank to manage financial crises as many European countries

did back then.

To understand the importance of the central bank, just imagine if the FED didn't exist

today during the current crises.

The only reason the stock market surged back is that the fed injected a ton of capital

into it, unemployment rose to an all-time high, but the fed gave the government the

ability to distribute stimulus checks.

If not for the fed, the current crises would have been much worse.

In 1906 one of the famous bankers wanted to make a fortune by pushing United Copper shares

to rise and force short sellers to buy his shares to exist their positions.

But his plan backfired as the short sellers found a different source to buy United copper

shares.

That move bankrupted the company and multiple other banks.

As the news of bankruptcy spread, depositors rushed to the banks to withdraw their savings.

As the banks run out of cash, they stopped lending money to their depositors and went

bankrupt one after another.

The stock market crashed to an all-time low.

There wasn't a central bank back then to restore depositor's faith in the banks, so the wall

street turned to JP Morgan.

He deposited a significant junk of his wealth into some of these banks to restore public

faith in the banking system and convinced other wealthy bankers to do the same, and

saved the economy from sliding into a crisis that god knows how long it would last.

2.

The Dot Com bubble  


The Internet has become such an important aspect of our lives that it's difficult to

imagine that 20 years ago, the Internet wasn't even a thing.

The 1990s were the golden era to start an online company: Amazon, Yahoo, PayPal, eBay,

google are were developed during that period.

The people who understood the extent of the Internet knew that the Internet is going to

revolutionize the world.

Everyone wanted to take advantage out of this gold rush, so investors threw their money

at every company that had a dot com at the end of it's name.

Everyone knew that most of these companies aren't going to survive, but one success would

not only compensate for all the failures but would pay back enormously.

And that's happened; in just 25 years, Amazon went from nothing to a 1.7 trillion-dollar

company.

But the overflow of cash into the tech companies pushed stock prices way higher than they worth.

Companies that barely knew what they were doing were valued at hundreds of millions

of dollars.

The Nasdaq index market rose by 400 percent in just five years (1995 to 2000).

By the mid 2000s the bubble began to burst, stocks of internet companies start to plummet.

By 2001, most internet companies had to declare bankruptcy.

The stock market had lost $5 trillion in market capitalization since the peak; the Nasdaq

was down by 78 percent. 


 3.

The Great Depression 


It's often called the greatest financial crisis in the history of the United States because

it lasted ten years and crashed the entire economy.

The American leadership tried everything to save the economy, but nothing worked out.

Every solution proved to be ineffective in the face of such a crisis.

  When world war I broke up, the entire European

continent was at war but the war slowly spread to the rest of the world.

Everyone was eager to win, but unfortunately, supplies were limited, especially food.

So the allies turned to the United States for help since it wasn't directly affected

by the war and had the economic power to provide that, so the US became the only major supplier. 

Wars by no means are good, but it brought a period of economic prosperity to the United

States.

If you were even a farmer, you could produce as much wheat as you can and sell at the highest

price.

Even though the war has ended by 1918, the demand for American goods, especially wheat,

didn't fall because the entire world was still recovering.


 Farmers began taking huge loans to buy more

land and equipment to farm more wheat, which led the real estate prices to increase.

That pushed people to buy even more lands hoping to sell it later for a higher price.

The same thing was happening to every other industry.

Stock prices were dramatically rising.

Even foreign countries and companies started investing in the US.

I guess you can already see the flow.

Many companies were overpriced because of excessive demand.

In fact most of these investments were based on speculations.

Nonetheless, that didn't stop people from investing.

When Europe recovered, the demand for American goods, especially wheat fell, since other

counties started farming as well.

The oversupply drove prices down And pushed the stock market to fall.

Everyone started selling their shares to cash out before the stock market plummets further.

But that crashed the market even more.

 Since wheat prices started falling, farmers couldn't pay back their debts (to the bank),

so that pressured the banks since everyone was asking back for their deposits.

The panic has already spread to the entire country.

Banks couldn't pay their obligations and had to shut down one after another.

in just ten-month, 744 banks failed. 


 4.

The 2008 Housing Bubble 


Do you like real estate?

Probably yes!

So does everyone else!

In the 2000s, investors were looking for a better return for their money.

The stock market just crashed and US treasury bonds offered a low rate of return, so investors

turned to real estate!

But big investors don't want to deal with individual buyers; tenants are a pain in the

ass.

I can say that from my experience in real estate.

So banks took all of these mortgages, bundled them together, and sold them to investors

in forms of shares.

Investors were pretty confident because worst cases scenario, if the borrowers would default

on their loans, the bank will take the house and sell it since home prices were rising.

When banks realized that there is such a huge demand, banks started giving mortgages to

people with a really low credit score.

Why?

Because they would take these mortgages, bundle them together, and sell them to investors.

Low-interest rates and rising home prices kept attracting more investors. 

But then one borrower defaulted, so his house was put on sale, then the second defaulted

and the third, soon there were so many houses back on-sell that home prices started falling.

That scared off investors, so they stopped buying these mortgage securities.

Lenders who created mortgage securities were left with lots of worthless securities, which

made home prices decrease further to the point where financial institutions had to declare

bankruptcy, such as Lehman Brothers.

AIG, the company that provided insurance for these mortgages, soon collapsed since it provided

so many insurances without having the money to back them up.

The margate crises crashed the financial industry, which almost led to the collapse of the entire

economy if the federal reserve didn't intervene and bail out the big banks. 


 5.

The Covid Crash  The current crisis is so big that 10, 20,

or 100 hundred from now, people will be reading in history books about how the entire world

economy crashed overnight because of an unexpected virus.

For most people, a pandemic seemed more of a sci-fi movie.

But what happened back in march is truly historical.

The crash was the fastest fall in global stock markets in financial history and the most

devastating crash since the great depression of 1929.

After decade-long prosperity, overnight, 38 million people had to apple for unemployment

benefits, and the US GDP fell by 5 percent.

The stock market crashed by 50 percent, but that didn't last long since the injection

of cash by the fed quickly brought back the investors to the stock market.

However, despite that, it will take us at least a few years to completely recover from

this economic crisis. 


 It's the nature of the economy to crash.

When the economy is rising, everyone jumps in to earn more, which leads prices to increase

faster than they suppose, which leads to a bubble.

And bubbles burst sooner or later.

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