Financial collapse

Economic collapse is any of a broad range of bad economic conditions, ranging from a severe, prolonged depression with high bankruptcy rates and high unemployment (such as the Great Depression of the 1930s), to a breakdown in normal commerce caused by hyperinflation (such as in Weimar Germany in the 1920s), or even an economically caused sharp rise in the death rate and perhaps even a decline in population (such as in countries of the former USSR in the 1990s).

Often economic collapse is accompanied by social chaos, civil unrest and a breakdown of law and order.

There are few well documented cases of economic collapse. One of the best documented cases of collapse or near collapse is the Great Depression, the causes of which are still being debated.

"To understand the Great Depression is the Holy Grail of macroeconomics." —Ben Bernanke (1995)

Bernanke's comment addresses the difficulty of identifying specific causes when many factors may each have contributed to various extents.

Past economic collapses have had political as well as financial causes. Persistent trade deficits, wars, revolutions, famines, depletion of important resources, and government-induced hyperinflation have been listed as causes.

In some cases blockades and embargoes caused severe hardships that could be considered economic collapse. In the U.S. the Embargo Act of 1807 forbade foreign trade with warring European nations, causing a severe depression in the heavily international trade-dependent economy, especially in the shipping industry and port cities, ending a great boom. The Union blockade of the Confederate States of America severely damaged the South's plantation owners; however, the South had little economic development. The blockade of Germany during World War I led to starvation of hundreds of thousands of Germans but did not cause economic collapse, at least until the political turmoil and the hyperinflation that followed. For both the Confederacy and Weimar Germany, the cost of the war was worse than the blockade. Many Southern plantation owners had their bank accounts confiscated and also all had to free their slaves without compensation. The Germans had to make war reparations.

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