what do you mean by economic crisis,its effect,causes,and its remedies?

Answer 1

it means that u shud give me 10 pts... hehe.

Answer 2

Needs a serious answer, y dont you post this in social science or economics category, i don't that think you will a get a proper response in this section of jokes/category

Answer 3

Dude, this is the joke category, U can't find any good answers here. Go to Science/Mathematics category. U'll find UR needed answer.

Answer 4

i am, what i am, and that's all that i am, because I'm Popeye the sailor man

Answer 5

hahahahahahahahah real funny joke ... thanks for asking =)

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here is the answer :

While the crisis took place under President Zedillo, the causes are usually attributed to Carlos Salinas de Gortari's outgoing administration. Salinas de Gortarti partly coined the term "December Mistake" when he stated in an interview that Zedillo's sudden reversal of the former administrative policies of tight currency controls was "a mistake." It must be mentioned that Salinas de Gortari's popularity and credibility at the time was still high; even though his government's currency policy put an unbelievable strain on the nation's finances, the resulting economic bubble gave Mexico a prosperity not seen in a generation. This period of rapid growth coupled with low inflation prompted some political thinkers and the media to state that "Mexico was on the verge of becoming a First World nation.", and in fact, it was the first of the "newly industrialized nations" to be admitted into the OECD in May, 1994. It was a known fact that the peso was overvalued (by at least 20%, according to some sources), but the extent of the Mexican economy's vulnerability was either not well-known or downplayed by Salinas de Gortari's tame políticos and media. Nonetheless this vulnerability was further aggravated by several unexpected events and macroeconomic mistakes of his administration.

Amongst several economists and historians, Hufbauer and Schoot (2005) have commented on several events in 1994, and the macroeconomic policy mistakes that precipitated the crisis:

1994 was the last year of the sexenio or 6-year administration of Carlos Salinas de Gortari who, following the PRI tradition on every election year, launched an amazingly high spending splurge, which translated into a historical high deficit
In order to finance the historical deficit (a 7% of GDP current account deficit) Salinas issued the Tesobonos, an attractive type of debt instrument that insured payment in dollars instead of pesos
Mexico experienced (common to those days) lax banking or corrupt practices; moreover, some members of the Salinas' family (though only his brother, Raúl, was imprisioned) collected enormous illicit payoffs
The most-likely-to-win candidate, Luis Donaldo Colosio, was assassinated in March of that year; a couple of months later José Francisco Ruiz Massieu, in charge of the investigation, was assassinated as well
The EZLN, an insurgent rebellion, officially declared war to the government in 1 January; even though the armed conflict ended two weeks later, the grievances and petitions remained a cause of concern, especially amongst some investors
All of these, and the increasing current account deficit fostered by consumer binding and government spending, caused alarm amongst savvy investors that had bought the tesobonos, mainly Mexican and a few foreigners, who sold them rapidly, depleting the already low central bank reserves. The economic orthodox thing to do, in order to maintain the fixed exchange rate functioning (at 3.3 pesos per dollar, within a variation band), would have been to sharply increase interest rates by allowing the monetary base to shrink, as dollars were being withdrawn from the reserves (Hufbauer & Schott, 2005). Given the fact that it was an election year, whose outcome might have changed as a result of a pre-election-day economic downturn, Banco de Mexico decided to buy Mexican Treasury Securities in order to maintain the monetary base, and thus the interest rates from rising. This, in turn, caused an even more dramatic decline in the dollar reserves. These decisions aggravated the already delicate situation, to a point in which the crisis became inevitable and devaluation was only one of many necessary adjustments. Nonetheless, nothing was done during the last 5 months of Salinas administration even after the elections were held in July of that year. Some critics presume this was done in order to maintain Salinas popularity who has seeking international support to become director general of the WTO. Zedillo took office on 1 December 1994.

A few days after a private meeting with major Mexican entrepreneurs in which his administration asked them for their opinion of a planned devaluation, Zedillo suddenly announced his government would let the fixed rate band to increase 15 percent (up to 4 pesos per US dollar), by stopping the previous administration unorthodox measures to keep it at the previos fixed level (by selling dollars, assuming debt, and so on). It was no longer possible to maintain the previous fixed rate as reserves were on the brink of depletion (having hit a low record of merely 9 billion). This measure, however, was not enough, and the government was even unable to hold this line, and decided to let it float. While experts agree that a devaluation was necessary, some critics of Zedillo's incumbent 22-day old administration, argue that although economically coherent, the way it was handled was politically incorrect. By having announced its plans for devaluation, they argue that many foreigners withdrew their investments, thus aggravating the effects. Whether the effects were aggravated further or not, the result was that the peso crashed under a floating regime from four pesos to the dollar (with the previous increase of 15%) to 7.2 to the dollar in the space of a week.

The United States intervened rapidly, first by buying pesos in the open market, and then by granting assistance of $50 billion (which will be explained in the next section) that same year. The dollar then stabilized at a rate of 6 pesos per dollar, and for the next two years, before being affected by the Asian Crisis in 1998, remained around 7 to 7.7 pesos per dollar.

Having to comply with the recently signed NAFTA obligations, Mexico did not resort to the traditional Latin American policies in times of crisis of trade protection and capital controls (which might have prolonged the crisis), but introduced strict controls on monetary and fiscal policy, open trade and devalued currency. The boom in exports that followed eased the recession which turned out to be a 10 month short-lived recession. By 1996, the economy was already growing (and peaked at 7% growth in 1999), and in 1997 Mexico repaid, ahead of schedule, all US Treasury loans.

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Financial assistance package
Mexican reserves continued to decrease into January 1995, raising the possibilities of peso inconvertibility, and international debt default. In view of the effects on Mexico's trading partners and the loss of confidence in Latin American economies in general, the IMF, the U.S. Government, and the Bank for International Settlements promised loans and guarantees to Mexico totalling almost $50 billion.

Contributions were as follows:

The United States arranged currency swaps and loan guarantees with a $20 billion total value.
The IMF promised an 18 month Stand-by Credit Agreement of around US $17.7 billion.
The Bank for International Settlements offered a $10 billion line of credit.
The Bank of Canada offered short term swaps with a US dollar value of around one billion.
The United States' assistance was provided via the treasury's Exchange Stabilization Fund. This was a slightly controversial decision, as President Clinton had already tried and failed to pass the Mexican Stabilization Act through congress. However, use of the ESF allowed the provision of funds without the approval of the legislative branch.

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Effects of the economic crisis of 1994
Mexican businesses with debts to be paid in dollars, or that relied on supplies bought from the USA, suffered an immediate hit, with mass industrial lay-offs and several well-publicized suicides. Businesses whose executives attended the meeting at Zedillo's office were spared the nightmare — forewarned, they quickly bought dollars and renegotiated their contracts into pesos. To make matters worse, the devaluation announcement was made mid-week, on a Wednesday, and for the remainder of the week foreign investors fled the Mexican market without any government action to prevent or discourage it until the following Monday when it was too late.

The December Mistake caused so much outrage that Salinas exiled himself in Ireland (he was campaigning worldwide for WTO head at the time). The incident also served to make it clear that his influence (if any) on the Zedillo administration was over.