History of American Economic Crisis

Some time ago, the Government of the United States (U.S.) reached an agreement with its creditors are Russia, Japan, and China, the related debt of U.S. $ 14.3 trillion, most of which mature on August 2, 2011. As expected, the U.S. does not pay the debt that is due the use of cash, but use more debt, amounting to U.S. $ 2.1 trillion.

New debt of U.S. $ 2.1 billion will mature in the next 10 years, and will be paid using the money of U.S. $ 2.4 trillion obtained from the state budget savings. Assuming that the U.S. is able to save expenses, the debt will be repaid next ten years. But if you learn from experience, usually later the debt will be extended again, who knows how long. If the debt can be compared as a time bomb, the bomb was never tamed, but only delayed the explosion.
The question, whether in the past 'bomb' as it ever explode? And when that happens, what happens next?
The success of the U.S. became a superpower at the moment, one of which is due to the incessant activities of accelerated development, by relying on debt. But in the past, the U.S. had several times failed to pay the debt, either government debt or the accumulation of debts of its citizens, which continues on a massive financial crisis. Okay, let us trace its history.

The first crisis in the U.S. occurred in 1819, known as the 'Panic of 1819'. The crisis is the end of a massive economic expansion that occurred across the country, after the U.S. win the war against England in 1812. Post-war, supported by a conducive political conditions, the local banks started giving loans to workers, employers, and anyone who wants to build houses, business premises, and so on. Economy was growing rapidly. But U.S. society when it forgets that the U.S. Government is also owed to local banks to finance its war. As economic activity starts to walk does not match the expected, starting from Europe will decline in demand for imports of foodstuffs from the U.S., then that's when businesses started to fail to pay its debts to the bank. The U.S. government alone can not cover the debts of its citizens, because he himself also had a mountain of debt. As a result, the U.S. experienced its first economic crisis, where dozens of banks forced to close, unemployment is rampant everywhere, and hundreds of people jailed for nonpayment of debts.

The next crisis occurred in 1857, which again preceded by the expansion of bank debt in the shed. At that time, exports of foodstuffs and agricultural products from the U.S. east coast (New York and surrounding areas) to Europe began to back down, so many U.S. citizens who live on the east coast move to the west (California and surrounding areas) to seek a new livelihood. They use the train for the trip. As a result rail transport service businesses to reap huge profits, and encourage banks to disburse loans to railway companies. Economic crisis began when the U.S. citizens, most of which are farmers, found that the land in the west was barren and could not be used for planting, so the next person who no longer travel to the west. When the railway company no longer get the passengers, then they began to go bankrupt one by one, and come dragging the bank that gave them a loan. The peak of the crisis of 1857 occurred when one of the largest insurance companies in the U.S. at that time, the Ohio Life Insurance, having failed to pay U.S. $ 7 million and went bankrupt, a very large value for the size of the time.

The third crisis occurred in the 1930s, known as the 'Great Depression'. The cause remains the same: debt. At this time of crisis, the debt began to involve the capital market. Starting from the fall of the Wall Street stock market in October 1929, the U.S. afflicted with major economic crisis that could only recover about ten years later. And that's thanks to World War II, where the U.S. economy when it began to move back because many businesses accept orders weapons and aircraft from countries in Europe.
The cause of the fall of Wall Street is none other than the U.S. because of capital market experienced a severe bubble before. Before the crash, stocks on Wall Street continued to rise rapidly, up to an average PER of the stocks in the Standard & Poor's had reached 32.6 times, very expensive!

The increase in stock price is driven too fast by the action of the securities and banks, which provide large loans to investors and traders to keep buying shares, including by way of short selling. When people began to realize that stock prices are too expensive, then they immediately sell the shares, and followed by other market players are panicking, so Wall Street immediately plummeted. The most prominent stock index in the U.S., Dow Jones, continued to fall until 1932. At that time, the Dow has dropped to 41.22, or 89% lower than pre-crisis positions.

After the 'Great Depression', until recently the U.S. has never experienced a big crisis again. Dow indeed had several times experienced major corrections, including in 2008, which is usually also caused by the bubble. However, the corrections never gets as bad as the correction that occurred in 1930. Unfortunately, as if unwilling to learn from experience, U.S. and debt again. Even in recent years, the debt continues to increase. In 2005, the debt of the U.S. 'only' U.S. $ 7.9 trillion, before it became U.S. $ 14.3 trillion at this point.
Then what about Indonesia? While Indonesia has a crisis in 1998 and 2008, the cause is also debt. In 1998, entrepreneurs who have a debt denominated in U.S. $ suddenly unable to repay its obligations, because the debt they suddenly swell, caused by the weakening of rupiah exchange rate against the dollar. Some people say that the 1998 crisis was actually created by the U.S., who deliberately play on Asian currencies, including Euro, so that Indonesia became indebted to the International Monetary Fund (IMF). For entrepreneurs Indonesia should be able to pay its debts if the word does not weaken rupiah against the U.S. $.
While in 2008, which has a debt is a U.S. citizen, that is debt for mortgages, instead of Indonesia. So the crisis that occurred in 2008 not as severe as the crisis that occurred in 1998. In 2008, CSPI 'only' dropped by half, before then rebounded and reached the position at this time.

From the above series of events, then we can take some conclusions:
 
1. Economic crisis usually starts from a too rapid economic growth, which sometimes even accompanied by euphoria. Though growth is not sustained by the real sector and macro fundamentals. Rarely occurs without a crisis initiated by the financial condition of the super-conducive in advance.

2. Aka Expectations excessive expectations for income is huge in the future, will only end in the fall. When banks lend money to the railway company, the bank is thought that the railway company will continue to profit every year. They did not consider the specific risks which could have led to the railroad went bankrupt. So, be reasonable!

3. History proves that the debt is the culprit of the crisis. Indeed, taking the debt to the bank or other financial institutions is good, if accompanied by a thorough consideration. But beyond that, then you hold the debt that it will be a time bomb.

4. Any increase in stock prices are too high up to the bubble, almost certainly will end with a massive correction, which was meant be careful whenever JCI up too fast.

5. However, the correction will stop when stock prices are cheap again, so it's time to shop for back stock, because basically the stock index will continue to rise over time. When the Great Depression, the Dow Jones was in position 41. While as of this writing, the Dow was at 12.132 position, or has gained about 300-fold within 80 years. Unless the world ends in 2012, felt it was not possible the Dow could drop to position 41 back.

Back to the U.S. debt problem. I wonder what will happen to the world economy if the U.S. really have the default? The answer of course would be a crisis, and stock prices around the world will fall. And unfortunately, we can not avoid it if it happens. However, as already mentioned above, whose name the crisis will not happen forever, and only a matter of time before the situation becomes normal again. The good news is that based on history, a crisis like that rarely happens. Most often only once every 10 years. Given Mr. Obama managed to delay the time of the explosion of 'bomb' which he held until the next 10 years, so for now we relax a little so-so, unless there be a new development about this American debt.

But if you want your investment is completely safe, then listen to Warren Buffett's advice: 'Do not you ever indebted to invest. Just use the existing funds, and even then do not use all of it. "
 
The U.S. economy is burdened with debt, giving a negative sentiment towards the stock market. Some even worry about the Dow Jones could slide to as low as 10,000.
According to analysts of capital markets, Shem Susilo, Dow Jones has terkoteksi consecutive 8 days. It is used as an excuse as a signal of market crash part 2. "I am still very confident this will not happen. Not easy to break through the psychological support Jones 11000-11500, let alone undermine the big support 10,000, "he said, Wednesday (3 / 8).
As the calculation of the initial logic, he added, Americans avoid debt default. But to pay the debt by adding new debts is not a good solution or just a temporary solution. "We believe they knew about it and will take steps solusif rational," he explained.

This belief is based on a map of the world economy today is far different from the situation before the market crash part 1. At that America is still the real superpower. Position and its economic role is very dominant at the time, so that every event in the American economy as it has a systemic impact on the world perekomian.
Currently, the fact, America became a country burdened with massive debt. And a map of the world economy has shifted to Asia, which on average have the endurance and power of domestic support is excellent.
"So the possibility of the presence of financial crisis is a very small volume II. Moreover, the price of energy becomes the trigger triggers crash part 1, is still relatively stir in a healthy range, "he explained.
Under these conditions, attention will also be focused on the movement of JCI. Therefore, it is definitely going to participate in conducting a situational adjustment of regional and global market conditions. But this will not last long so it's not crash.

"So no need to panic. Stay with cool running investment concept. Keep what is worth keeping, and loose what ought to be removed. Panic is only left for hot traders who trade on the stock market without any concept, "he said.

Source : Syiahali