CRISES AND SOCIETIES
CRISES AND SOCIETIES
First of all , sometimes I feel have to talk economic issues, so I know that this subject is so hard for me also can be for readers but I will try to ease some definitions that is why I will not explain with academic definitions , I will just blend critic issues with current and old events. This way I can explain very easily.
There are two main versions to understand economic schools . One of them Orthodox , other Heterodox school. And some schools can show us that which are schools more realistic to understand problems in the economy .
In the economy , main problems are caused by chaotic process therefore we just can estimate with many complex instruments about that. Our job is to guess. Also unfortunately there are so many manipulatives orientation which are created by Capitalists in the economy. we can not control very well. Orthodox Economy argues that everything going to balance in the free market but we know that nearly we are living under the economic crisis in every 8 years after the 2000s'. İt means : Ortodoks economy has not successful theory to fix problems in the economy and they cannot understand that what will happen sort of the next economic crisis .
As oppesed to when we look at the Heterodox Economy, we can get sensible answers about economic crisis
Schools of heterodox economics include socialism, Marxism, post-Keynesian and others. These schools of thought often combine the macroeconomic outlook found in Keynesian economics with approaches critical of neoclassical economics
Now I am going to explore with you what caused last crisis in the U.S and I will make sort of story but real story . Don't miss this detail :D
Here we go !!!!
Basically In the USA someone that wants to buy a house will often borrow hundres of dollars from bank. In return, the bank gets a piece of paper , called a mortgage . Every mouth , the homeowner has to pay back a portion of the principle . If They stop paying that`s called a default and whomever holds that piece of paper gets the house. Traditionally , It was pretty hard to get a mortgage if you had bad credit or did not have steady job . lenders just did not want to take the risk that you might "default" on your loan but all that started to the changed in the 2000s.
In the 2000s , investors in the U.S and abroad looking for a low risk , high return investment started throwing their money at the U.S housing market but global investors did not want to just buy up my mortgage and Büşra`s mortgage. İts too much hassle to deal with us as a individuals. I mean , we are pains . İnstead , they bought investment called mortgage backed-securities. Mortgage back-securities are created when large financial institutions securitize mortgages.
Basically they buy up thousands of individuals mortgages and sell shares of that pool to investors.
They gave a lot of these mortgage back-securities - The best of the best . and back when mortgages were only for borrowers with good credit , mortgage debt was a good investment.
After all that , In the economy was formed the Housing Bubble because the U.S price of homes was going up and up . You remember House Bubble , right ? Rapid increases, driven by irrational decisions and people just could not pay for their incredibly expensive . Borrowers started defaulting, which put more houses back on the market for sale , but there were not buyers. So supply was up, demand was down, and house prices started collapsing. Some major financial institutions declared bankruptcy,like Lehman Brothers.
Panic set in. Trading and the credit markets froze. The stock marked crushed. And the U.S economy suddenly found itself in a disastrous recessions. What happened in Turkey while the world is under the economic crisis? Lets check out!
First serious effect was on the GDP and Turkish GDP falls 13.8 percent, economy enters recession also we can see ratio on the chart easily.
Recession means : A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters( from Oxford)
From the monetary side, the independence gained at the beginning of the 2000s, allowed the Turkish Central Bank to promptly react when the first crisis signs became evident but when we close to the recent history to 2019 , there is no the independence of Central Bank . Because Erdogan wants to under control to Central Bank . He dismissed to Murat Çetinkaya from Central Bank who is previous chief in the august of 2019.
That`s why If we want to strong economy in our country primarily we have to ensure that the independence of Central Bank otherwise we can not bring investors and generate revenue from international investors. On the other hand we must strive to improve product of high-tech but such we can fix balance of trade and ameliorate unemployment ratio.
If we can not establish democracy ,we can going to so worse situations which politically and economically within one year. At now we are compulsory to hot money from foreign investor because we are not able to earn foreign currency from international trade and we have to high up our interest ratio to get hot money without any production. However President of Turkey does not want to high interest ratio . He has very strange assumptions to figure out problems, also he claims that he is an economist =).
I guess our huge problems are arise from ignorance because of we have not high-quality education system. Almost every year they have changing the education system . In my opinion they do not want to awareness in the society about contrast of system.
First of all , sometimes I feel have to talk economic issues, so I know that this subject is so hard for me also can be for readers but I will try to ease some definitions that is why I will not explain with academic definitions , I will just blend critic issues with current and old events. This way I can explain very easily.
There are two main versions to understand economic schools . One of them Orthodox , other Heterodox school. And some schools can show us that which are schools more realistic to understand problems in the economy .
In the economy , main problems are caused by chaotic process therefore we just can estimate with many complex instruments about that. Our job is to guess. Also unfortunately there are so many manipulatives orientation which are created by Capitalists in the economy. we can not control very well. Orthodox Economy argues that everything going to balance in the free market but we know that nearly we are living under the economic crisis in every 8 years after the 2000s'. İt means : Ortodoks economy has not successful theory to fix problems in the economy and they cannot understand that what will happen sort of the next economic crisis .
As oppesed to when we look at the Heterodox Economy, we can get sensible answers about economic crisis
Schools of heterodox economics include socialism, Marxism, post-Keynesian and others. These schools of thought often combine the macroeconomic outlook found in Keynesian economics with approaches critical of neoclassical economics
So, in my opinion if we want to figure out hard problems as economist , we must look at from window of Heterodox school. Also we must take into account historical events about economic crisis that is why I would like to start with chronological events about economic crisis as globally and then I will link up locally situation . Before I want to give you some basic economy literature and we can handle main problems of crisis.
BRİEF ONE :
Economic crises happen when there is an imbalance of either supply or demand regardless of the type of crisis. Allow me to draw an image for you
For example: When we over-supply loans to invest in real estate we get a crisis.
Regardless of the crisis look for the over-supply or over-demand on something and you will be looking at a crisis happening and a bubble waiting to burst. There is no good over-supply or over-demand of anything. Even over supply of food means the industry is going to give way because businesses are not finding customers and they will then lose. We will be under supplied for food after that. Unless they export to countries poor in those resources. It needs to balance itself otherwise why do you think all countries support international trade?
BRİEF TWO:
Why are economic crises unpredictable?
The empirical answer to this question lies in mathematics, specifically statistics. Risk analysis, forecasting, and predictive models all carry a common assumption within them. Namely that the probabilities adhere to a normal model of risk, commonly understood as a bell curve .
The only problem is that financial markets do not adhere to a normal distribution.
BRİEF ONE :
Economic crises happen when there is an imbalance of either supply or demand regardless of the type of crisis. Allow me to draw an image for you
For example: When we over-supply loans to invest in real estate we get a crisis.
Regardless of the crisis look for the over-supply or over-demand on something and you will be looking at a crisis happening and a bubble waiting to burst. There is no good over-supply or over-demand of anything. Even over supply of food means the industry is going to give way because businesses are not finding customers and they will then lose. We will be under supplied for food after that. Unless they export to countries poor in those resources. It needs to balance itself otherwise why do you think all countries support international trade?
BRİEF TWO:
Why are economic crises unpredictable?
The empirical answer to this question lies in mathematics, specifically statistics. Risk analysis, forecasting, and predictive models all carry a common assumption within them. Namely that the probabilities adhere to a normal model of risk, commonly understood as a bell curve .
The only problem is that financial markets do not adhere to a normal distribution.
Now I am going to explore with you what caused last crisis in the U.S and I will make sort of story but real story . Don't miss this detail :D
Here we go !!!!
Basically In the USA someone that wants to buy a house will often borrow hundres of dollars from bank. In return, the bank gets a piece of paper , called a mortgage . Every mouth , the homeowner has to pay back a portion of the principle . If They stop paying that`s called a default and whomever holds that piece of paper gets the house. Traditionally , It was pretty hard to get a mortgage if you had bad credit or did not have steady job . lenders just did not want to take the risk that you might "default" on your loan but all that started to the changed in the 2000s.
In the 2000s , investors in the U.S and abroad looking for a low risk , high return investment started throwing their money at the U.S housing market but global investors did not want to just buy up my mortgage and Büşra`s mortgage. İts too much hassle to deal with us as a individuals. I mean , we are pains . İnstead , they bought investment called mortgage backed-securities. Mortgage back-securities are created when large financial institutions securitize mortgages.
Basically they buy up thousands of individuals mortgages and sell shares of that pool to investors.
They gave a lot of these mortgage back-securities - The best of the best . and back when mortgages were only for borrowers with good credit , mortgage debt was a good investment.
After all that , In the economy was formed the Housing Bubble because the U.S price of homes was going up and up . You remember House Bubble , right ? Rapid increases, driven by irrational decisions and people just could not pay for their incredibly expensive . Borrowers started defaulting, which put more houses back on the market for sale , but there were not buyers. So supply was up, demand was down, and house prices started collapsing. Some major financial institutions declared bankruptcy,like Lehman Brothers.
Panic set in. Trading and the credit markets froze. The stock marked crushed. And the U.S economy suddenly found itself in a disastrous recessions. What happened in Turkey while the world is under the economic crisis? Lets check out!
First serious effect was on the GDP and Turkish GDP falls 13.8 percent, economy enters recession also we can see ratio on the chart easily.
From the monetary side, the independence gained at the beginning of the 2000s, allowed the Turkish Central Bank to promptly react when the first crisis signs became evident but when we close to the recent history to 2019 , there is no the independence of Central Bank . Because Erdogan wants to under control to Central Bank . He dismissed to Murat Çetinkaya from Central Bank who is previous chief in the august of 2019.
That`s why If we want to strong economy in our country primarily we have to ensure that the independence of Central Bank otherwise we can not bring investors and generate revenue from international investors. On the other hand we must strive to improve product of high-tech but such we can fix balance of trade and ameliorate unemployment ratio.
If we can not establish democracy ,we can going to so worse situations which politically and economically within one year. At now we are compulsory to hot money from foreign investor because we are not able to earn foreign currency from international trade and we have to high up our interest ratio to get hot money without any production. However President of Turkey does not want to high interest ratio . He has very strange assumptions to figure out problems, also he claims that he is an economist =).
I guess our huge problems are arise from ignorance because of we have not high-quality education system. Almost every year they have changing the education system . In my opinion they do not want to awareness in the society about contrast of system.
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