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A commodity exchange established in 1848 that today trades in both agricultural and
Iinancial contracts. The CBOT originally traded only agricultural commodities such as
wheat, corn and soybeans. Now, the CBOT oIIers options and Iutures contracts on a wide
range oI products including gold, silver, U.S. Treasury bonds and energy.

The Chicago Board oI Trade was Iormed in that city in 1848 by a group oI businessmen who
wanted to bring order to the Midwest's chaotic grain market. Farm prices were ruled by boom
and bust cycles. In the winter, when grain was scarce, the price was high. At harvest time,
Chicago was inundated with grain, and Iarmers had to accept extremely low prices.
Some Iarmers kept their grain back Irom market, preIerring to burn it Ior Iuel rather
than waste money shipping it when prices were low. Other Iarmers Iound that they could not
get a Iair price Ior their corn or wheat, and they ended up dumping it into Lake Michigan
rather than pay to haul or store it. The Board oI Trade oIIered Iarmers a way to get a
guaranteed price Ior their goods ahead oI time by oIIering 'to arrive' contracts, or Iutures. At
planting time, a Iarmer could negotiate the price he would get at harvest time. Big buyers oI
grain beneIited by assuring themselves in advance a speciIic supply.


. 1 9 2 9 T H E G R E A T D E P R E S S I O N .

The Great Depression was a severe worldwide economic depression in the decade
preceding World War II. The timing oI the Great Depression varied across nations, but in most
countries it started in about 1929 and lasted until the late 1930s or early 1940s. It was the
longest, most widespread, and deepest depression oI the 20th century. In the 21st century, the
Great Depression is commonly used as an example oI how Iar the world's economy can decline.
The depression originated in the U.S., starting with the Iall in stock prices that began around
September 4, 1929 and became worldwide news with the stock market crash oI October 29, 1929
(known as Black Tuesday). From there, it quickly spread to almost every country in the world.
The Great Depression had devastating eIIects in virtually every country, rich and poor.
Personal income, tax revenue, proIits and prices dropped, while international trade plunged by
more than 50. Unemployment in the U.S. rose to 25, and in some countries rose as high as
33. Cities all around the world were hit hard, especially those dependent on heavy industry.
Construction was virtually halted in many countries. Farming and rural areas suIIered as crop
prices Iell by approximately 60 Facing plummeting demand with Iew alternate sources oI jobs,
areas dependent on primary sector industries such as cash cropping, mining and logging suIIered
the most.
Some economies started to recover by the mid-1930s; in many countries the negative
eIIects oI the Great Depression lasted until the start oI World War II.



. 1 9 4 4 B R E T T O N W O O D S S Y S T E M .

The Bretton Woods system oI
monetary management established the
rules Ior commercial and Iinancial
relations among the world's major
industrial states in the mid 20th century.
The Bretton Woods system was the Iirst
example oI a Iully negotiated monetary
order intended to govern monetary
relations among independent nation-states.
Preparing to rebuild the international economic system as World War II was still raging,
730 delegates Irom all 44 Allied nations gathered at the Mount Washington Hotel in Bretton
Woods, New Hampshire, United States, Ior the United Nations Monetary and Financial
ConIerence. The delegates deliberated upon and signed the Bretton Woods Agreements during
the Iirst three weeks oI July 1944.
Setting up a system oI rules, institutions, and procedures to regulate the international
monetary system, the planners at Bretton Woods established the International Monetary Fund
(IMF) and the International Bank Ior Reconstruction and Development (IBRD), which today is
part oI the World Bank Group. These organizations became operational in 1945 aIter a suIIicient
number oI countries had ratiIied the agreement.
The chieI Ieatures oI the Bretton Woods system were an obligation Ior each country to
adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar
and the ability oI the IMF to bridge temporary imbalances oI payments.
On August 15, 1971, the United States unilaterally terminated convertibility oI the dollar
to gold. As a result, "the Bretton Woods system oIIicially ended and the dollar became Iully 'Iiat
currency,' backed by nothing but the promise oI the Iederal government." This action, reIerred to
as the Nixon shock, created the situation in which the United States dollar became the sole
backing oI currencies and a reserve currency Ior the member states







. 1 9 7 3 O I L S H O C K .
The 1973 oil crisis started in October 1973, when the members oI Organization oI Arab
Petroleum Exporting Countries or the OAPEC (consisting oI the Arab members oI OPEC, plus
Egypt, Syria and Tunisia) proclaimed an oil embargo. This was "in response to the U.S. decision
to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With
the U.S. actions seen as initiating the oil embargo and the long term possibility oI high oil prices,
disrupted supply and recession, a strong riIt was created within NATO.
Additionally, some European nations and Japan sought to disassociate themselves Irom
the U.S. Middle East policy. Arab oil producers had also linked the end oI the embargo with
successIul U.S. eIIorts to create peace in the Middle East, which complicated the situation. To
address these developments, the Nixon Administration began parallel negotiations with both
Arab oil producers to end the embargo, and with Egypt, Syria, and Israel to arrange an Israeli
pull back Irom the Sinai and the Golan Heights aIter the Iighting stopped.
By January 18, 1974, Secretary oI State Henry Kissinger had negotiated an Israeli troop
withdrawal Irom parts oI the Sinai. The promise oI a negotiated settlement between Israel and
Syria was suIIicient to convince Arab oil producers to liIt the embargo in March 1974. By May,
Israel agreed to withdraw Irom some parts oI the Golan Heights.
Independently, the OPEAC members agreed to use their leverage over the world price
setting mechanism Ior oil to stabilize their real incomes by raising world oil prices. This action
Iollowed several years oI steep income declines aIter the recent Iailure oI negotiations with the
major Western oil companies earlier in the month.
Industrialized economies relied on crude oil, and OPEC was their predominant supplier.
Because oI the dramatic inIlation experienced during this period, a popular economic theory has
been that these price increases were to blame, as being suppressive oI economic activity.
A minority dissenting opinion questions the causal relationship described by this theory.
The targeted countries responded with a wide variety oI new, and mostly permanent, initiatives
to contain their Iurther dependency. The 1973 "oil price shock", along with the 19731974 stock
market crash, have been regarded as the Iirst event since the Great Depression to have a
persistent economic eIIect.




. 1 9 8 0 - 1 9 9 0 - ~U . S B O O M .
The savings and loan crisis oI the 1980s and 1990s (commonly dubbed the
S&L crisis) was the Iailure oI about 747 out oI the 3,234 savings and loan
associations in the United States.
A savings and loan or "thriIt" is a Iinancial institution that accepts savings
deposits and makes mortgage, car and other personal loans to individual
membersa cooperative venture known in the United Kingdom as a Building
Society. "As oI December 31, 1995, RTC estimated that the total cost Ior resolving
the 747 Iailed institutions was $87.9 billion."
The remainder oI the bailout was paid Ior by charges on savings and loan
accounts which contributed to the large budget deIicits oI the early 1990s.
The concomitant slowdown in the Iinance industry and the real estate market
may have been a contributing cause oI the 199091 economic recession. Between
1986 and 1991, the number oI new homes constructed per year dropped Irom 1.8
million to 1 million, which was at the time the lowest rate since World War II












. 1 9 9 1 I N D I A D E V A L U A T E D I T S O W N C U R R E N C Y .
1991 is oIten cited as the year oI economic reIorm in India. Surely, the
government`s economic policies changed drastically in that year, but the 1991
liberalisation was an extension oI earlier, albeit slower, reIorm eIIorts that had
begun in the 1970s when India relaxed restrictions on imported capital goods as
part oI its industrialisation plan.
Then the Import-Export Policy oI 1985-1988 replaced import quotas with
tariIIs. This represented a major overhaul oI Indian trade policy as previously,
India`s trade barriers mostly took the Iorm oI quantitative restrictions. AIter
1991, the Government oI India Iurther reduced trade barriers by lowering tariIIs
on imports. In the post-liberalisation era, quantitative restrictions have not been
signiIicant.
While the devaluation oI 1991 was economically necessary to avert a
Iinancial crisis, the radical changes in India`s economic policies were, to some
extent, undertaken voluntarily by the government oI P V Narasimha Rao. As in
1966, there was Ioreign pressure on India to reIorm its economy, but in 1991,
the government committed itselI to liberalisation and Iollowed through on that
commitment.
According to Srinivasan and Bhagwati, 'Conditionality played a role, Ior
sure, in strengthening our will to embark on the reIorms. But the seriousness
and the sweep oI the reIorms. demonstrated that the driving Iorce behind the
reIorms was equally. our own conviction that we had lost precious time and
that the reIorms were Iinally our only option (IESI, pp 93). In 1991, India still
had a Iixed exchange rate system, where the rupee was pegged to the value oI a
basket oI currencies oI major trading partners.
At the end oI 1990, the Government oI India Iound itselI in serious
economic trouble. The government was close to deIault and its Ioreign exchange
reserves had dried up to the point that India could barely Iinance three weeks`
worth oI imports. As in 1966, India Iaced high inIlation, large government
budget deIicits, and a poor balance oI payments position.







. 1 9 9 7 - S o u t h E a s t A s i a n C r i s i s .
The Asian Iinancial crisis was a period oI Iinancial crisis that gripped much oI
Asia beginning in July 1997, and raised Iears oI a worldwide economic meltdown due to
Iinancial contagion.
The crisis started in Thailand with the Iinancial collapse oI the Thai baht caused
by the decision oI the Thai government to Iloat the baht, cutting its peg to the U.S. dollar,
aIter exhaustive eIIorts to support it in the Iace oI a severe Iinancial overextension that
was in part real estate driven. At the time, Thailand had acquired a burden oI Ioreign debt
that made the country eIIectively bankrupt even beIore the collapse oI its currency. As
the crisis spread, most oI Southeast Asia and Japan saw slumping currencies, devalued
stock markets and other asset prices, and a precipitous rise in private debt.
Though there has been general agreement on the existence oI a crisis and its
consequences, what is less clear are the causes oI the crisis, as well as its scope and
resolution. Indonesia, South Korea and Thailand were the countries most aIIected by the
crisis. Hong Kong, Malaysia, Laos and the Philippines were also hurt by the slump. The
People's Republic oI China, Pakistan, India, Taiwan, Singapore, Brunei and Vietnam
were less aIIected, although all suIIered Irom a loss oI demand and conIidence
throughout the region.
Foreign debt-to-GDP ratios rose Irom 100 to 167 in the Iour large ASEAN
economies in 199396, then shot up beyond 180 during the worst oI the crisis. In South
Korea, the ratios rose Irom 13 to 21 and then as high as 40, while the other northern
newly industrialized countries Iared much better. Only in Thailand and South Korea did
debt service-to-exports ratios rise.
Although most oI the governments oI Asia had seemingly sound Iiscal policies,
the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to
stabilize the currencies oI South Korea, Thailand, and Indonesia, economies particularly
hard hit by the crisis. The eIIorts to stem a global economic crisis did little to stabilize the
domestic situation in Indonesia, however. AIter 30 years in power, President Suharto was
Iorced to step down on 21 May 1998 in the wake oI widespread rioting that Iollowed
sharp price increases caused by a drastic devaluation oI the rupiah. The eIIects oI the
crisis lingered through 1998. In 1998 the Philippines growth dropped to virtually zero.
Only Singapore and Taiwan proved relatively insulated Irom the shock, but both suIIered
serious hits in passing, the Iormer more so due to its size and geographical location
between Malaysia and Indonesia. By 1999, however, analysts saw signs that the
economies oI Asia were beginning to recover.




. 2 0 1 1 - E U R O Z O N E C R I S I S .
From late 2009, Iears oI a sovereign debt crisis developed among Iiscally
conservative investors concerning some European states, intensiIying in early 2010. This
included eurozone members Greece, Ireland, Italy, Spain and Portugal, and also some
non-Eurozone EU countries. Iceland, the country which experienced the largest crisis in
2008 (see 2008-2011 Icelandic Iinancial crisis) when its entire international banking
system collapsed, has emerged less aIIected by the sovereign debt crisis as Icelandic
citizens reIused to bail out Ioreign banks in a reIerendum.
In the EU, especially in countries where sovereign debts have increased sharply
due to bank bailouts, a crisis oI conIidence has emerged with the widening oI bond yield
spreads and risk insurance on credit deIault swaps between these countries and other EU
members, most importantly Germany.
While the sovereign debt increases have been most pronounced in only a Iew
eurozone countries they have become a perceived problem Ior the area as a whole. In
May 2011, Greek public debt gained prominence as a matter oI concern. The Greek
people generally reject the austerity measures and have expressed their dissatisIaction
through angry street protests. In late June 2011, Greece's government proposed additional
spending cuts worth 28bn euros (25bn) over Iive years. The next 12 billion euros Irom
the Eurozone bail-out package will be released when the proposal is passed, without
which Greece would have had to deIault on loan repayments due in mid-July.
Concern about rising Government debt levels across the globe together with a
wave oI downgrading oI European government debt created alarm in Iinancial markets.
On 9 May 2010, Europe's Finance Ministers approved a rescue package worth t750
Billion aimed at ensuring Iinancial stability across Europe by creating the European
Financial Stability Facility (EFSF).
On 2 May 2010, the Eurozone countries and the International Monetary Fund
agreed to a t110 billion loan Ior Greece, conditional on the implementation oI harsh
austerity measures. The Greek bail-out was Iollowed by a t85 billion rescue package Ior
Ireland in November, a t78 billion bail-out Ior Portugal in May 2011, then continuing
eIIorts to meet the continuing crisis in Greece and other countries.
In October 2011, Eurozone leaders meeting in Brussels agreed on a package oI
measures designed to prevent the collapse oI member economies due to their spiralling
debt. This included a proposal to write oII 50 oI Greek debt owed to private creditors,
increasing the EFSF to about t1 trillion and requiring European banks to achieve 9
capitalisation. Greeks will be asked to approve the package in a reIerendum expected to
be held in early 2012.