Invited Review From Modern History Of Financial Crisis

After the Opium War of1840China gradually changed into a semi-colonial andsemi-feudal society. As the isolated state of this country being broke up, the invadersnot only brought capitalized production but also shock the foundation of old societysystem. Although several historical factors changed a lot, by analyzing the reason offinancial crisis, we are still able to get significant conclusions which should light onmodern society. The purpose of this paper is to acquire significant conclusions by trackthe evolution of financial crisis which including inflation in Xianfeng Times, DebtTransaction in1883, and Rubber Stock Crisis in1910, and Exchange Crisis by Faith.At the meanwhile, this paper tries to analyze the relationship between moderneconomics and historical financial crisis as well. Illustrations are divided into fivesections.The first section is introduction which embraces the background, significance,methodology, organization, and reference. Some researchers have already got somesignificant conclusion. This paper absorbed some valuable achievements that exploreddifferent financial crisis in different angles.The second section is the background of modern financial crisis. By analyzingseveral modern financial crisis including inflation in Xianfeng Times, DebtTransaction in1883, Rubber Stock Crisis in1910, and Exchange Crisis by Faith, weare able to see there are identical characters: with economic development, investmentcapital became unstable; high relation between domestic investment and foreign directinvestment. The only exception is the inflation and financial chaos which is caused bywars.The third section is historical process and characters of China modern financialcrisis. Because of civil wars and payments for war reparation, financial deficitsgradually enlarged since1851. The government decided to utilize inflation, whichmade the price sour and produced serious impact on economics and people’s daily life,to deal with deficit problems. Exchange Crisis by Faith which happened in1883is one of most serious financial crisis. Triggered by investment loss from Guangyong Hu, thiscrisis, which had impacts on more than forty banks and caused twenty companiesbankrupt, produce approximately1,500,000ounce silver loss. After a short break,another serous financial crisis which is called Rubber Stock Crisis happened. The twofinancial crisises shared several characteristics: the extent of damage from these twofinancial crisises is huge; the financial crisis developed and spread in a short time; thenegative impacts are huge and lasted a long time.The fourth section is analysis of the reason of financial crisis. These financialcrisis happened in different periods which has different background, of course, havedifferent characters. The main reason of inflation happened in Xianfeng Time can bedivided into two sections: first of all, the government are forced to pay war reparationswhich make huge amount of silver outflow; secondly, lack of effective supervise,sudden increase of money supply inevitably give rise to inflation. In sum, speculation,government deficits, that increasing risk of local bank and invading by foreign capitaltogether led to Exchange Crisis by Faith.The reason of Rubber Stock Crisis can bedivided into three parts: fist, foreigner took advantage of the loopholes in financial lawto make huge profits; Second, political struggles deteriorated this crisis; finally, thefantastic enthusiasms on speculation worsened this crisis either. The loopholes infinancial law, lack of supervise, and damage on legislation system together give rise toExchange Crisis by Faith. As meanwhile, domestic industrial was seriously destroyed.The fifth section is what we can learn from financial crisis in modern history. Firstof all, people should enhance ability to manage risk of investment. Correspondinggovernment officers should acquire advanced ability of financial management.Secondly, take effort to probe financial theories, make sure the financial market iscompatible with the level of economic development. Finally, corresponded legislationand effective supervise are necessary. We have to make more requirements for abilityot risk management. Two suggestions and four enlightenments showed in the end ofthis paper as well。...