How Financial Crisis That Occurs Are Beyond Our Prediction

How Financial Crisis That Occurs Are Beyond Our Prediction

Let us understand about black swan

It is nothing but an event or happening that drifts beyond the situations that are expected to be normal and a situation whose prediction is highly difficult. Similarly predicting cryptocurrency trade market is difficult as well, see the following source. When a black swan event happens they are commonly very random in nature and unexpected.

There was a finance professor by name Nassim Nicholas Taleb who made the term black swan popular, who was also a writer and a previously traded on the Wall Street. He introduced the idea of a black swan event following the consequences of the 2008 financial crisis. It was argued by Nassim Nicholas Taleb that predicting the event of a black swan is impossible but still the consequences would be catastrophic. Hence, it is very crucial for all the people to be under assumption always that a black swan event is a probability, irrespective of what the occurrence might be and be prepared for whatever comes. He also pointed out that when a system brakes and it is let to fail, it will result in making the system stronger so that it can face the catastrophe if any occur in the future by using the example of 2008 financial crisis and the idea of black swan event.

Examples of black swan events that have occurred in the past

A very recent financial crisis that happened was in the year of 2008 when the U.S. housing market crashed financially, hence it is known to all as the recent black swan event till date. As a result of this crash, it was globally catastrophic and only a couple of outliers had predicted that this is going to happen.

One of the 21st century’s worst scenario was the hyperinflation that happened in the year of 2008, the hyperinflation happened in Zimbabwe which had a rate of peak inflation which was higher than 79.6 billion percent. When an inflation that has occurred has that much of amount involved it is close to impossible to predict it because of which this can ruin the finance of the country very easily.

Similar to the financial crisis of 2008 is another one known as the dot-com bubble of 2001 which was considered as another black swan event. Before the economy of America disintegrated in a catastrophic manner, they were growing rapidly with respect to the economy and there was an increase in the private wealth.