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Financial Crisis

A period of severe disruption in financial markets characterized by asset price collapses, bank failures, loss of confidence, and reduced access to credit.

Economic Crisis

A sharp downturn in economic activity marked by falling GDP, rising unemployment, declining investment, and reduced consumption.

Liquidity Problem

A situation where a institution or country lacks short-term cash to meet obligations despite being fundamentally solvent

Insolvency

A condition in which liabilities exceed assets, meaning an insitution or government cannot repay debts even in the long run

Balance of Payments Crisis

A crisis that occurs when a country cannot meet its international payment obligations due to capital flight or reserve depletion

Sovereign Debt Crisis

A situation in which a government is unable to service its public debt, leading to default, restructuring, or external intervention

Capital Flow Cycle

The recurring pattern of capital surges into developing economies during booms followed by sudden stops or reversals during downturns

Capital Flight

The rapid movement of financial assets out of a country due to fear of instability, devaluation or default

Petrodollars

US dollars earned by oil-exporting countries through oil sales priced in dollars

Petrodollar Recycling

The process by which oil-exporting states deposit surplus dollars in western banks, which then lend those funds internationally

latin american debt crisis (1980)

a regional financial collapse caused by excessive borrowing, rising US interest rates, and inability to service dollar-denominated debt

volcker shock

a sharp increase in u.s. interest rates under federal reserve chair paul volcker in the early 1980s aimed at controlling inflation

dollar-dominated debt

debt issued in u.s. dollars, which becomes more expensive to repay when the dollar strengthens or interest rates rise

lender of last resort

a central bank or institution that provides emergency liquidity to prevent financial collapse during crises

bagehot’s dictum (rule)

the principal that in a financial crisis, central banks should lend freely, at a penalty rate, against good collateral

moral hazard

the risk that actors take excessive risks when they believe they will be rescued from failure

bank recapitalization

the process of restoring a banks capital base, often through governments funds, to prevent failure

asset purchases

central bank or government buying of financial assets to stabilize markets and increase liquidity

federal reserve swap lines

arrangements that allow foreign central banks to access us dollars during periods of financial stress

structural adjustment

imf-mandated economic reforms requiring austerity, privatization, deregulation, and trade liberalization in exchange for financial assistance

auesterity

policies focused on reducing government spending, cutting deficits, and limiting public sector activity during economic downturns

globalization

the increasing integration of national economies through trade, finance, technology and capital mobility

skill-based technological change

technological progress that disproportionately benefits skilled workers, increasing wage and income inequality

plutocracy

a system in which economic elites exercise disproportionate political and economic power

bretton woods system

a post-world war II international monetary system featuring fixed exchange rates and capital controls anchored by the us dollar

“new” bretton woods

proposals to reform global financial governance to better mange instability, inequality and coordination failures

mar-a-lago accord

a proposed plan associated with the maga coalition aimed at restructuring global finance to support us reindustrialization

financial globalization

the expansion of cross-borden financial flows and intergration of global capital markets

finance capitalism

an economic system dominated by financial markets and institutions rather than productive investment

structural power of finance

the ability of financial markets and institutions to shape state policy by constraining available economic choices