Not only high inflation is dangerous. Deflation also sends a cold shiver down the spine of many a person. Slight inflation or deflation occurs in every economy. The decisive factor is the level of the respective rate. If it reaches too high a level, it will have a major impact on the economy.
Deflation means that the amount of money and credit decreases and that products, such as food and all consumer goods, continuously lose value over a long period of time. Deflation is the result of a weakening economic engine. The reasons for this can be different.
A raised key interest rate by central banks leads to more expensive loans for companies and private customers. As a result, less is invested - the economy slows down. Another reason for deflation is reduced government spending to reduce debt. This reduces demand by the government - it spends less money. This also results in less investment and the entire economy starts to stutter.
Deflation can also be the result of an economic downturn. Both citizens and the state are unsettled and start saving their money. Demand falls and so do the prices of products on the market. Many companies no longer make profits and have to make savings. A high deflation means therefore also high unemployment and many insolvencies.
This then quickly creates a vicious circle. When many people lose their jobs, companies go bankrupt and interest rates are too high, less money enters the money cycle and more and more savings and layoffs are needed to compensate for the loss of sales. And then there are companies and individuals who could continue to afford everything. But they speculate on ever falling prices and even cheaper investment opportunities. And so it goes on and on. This effect is also called a deflationary spiral.

A stock market crash is a dramatic drop in share prices within a short period of time. A stock market crash is often the harbinger or expression of a global economic crisis. Increasing fear and panic selling cause prices to plummet.
The cause of the sudden crash is often the blowing of a speculative bubble. Unexpected political or economic events can also trigger a crash - for example, the attack on the World Trade Center in 2001. The first stocks appeared around 1602 in the Netherlands. This is also where the first stock market crash in history happened - the tulip bubble.
However, the creation of a bubble still works the same way today. Prices rise and attract more and more speculators. These continue to drive prices to galactic heights until prices exceed the actual value of the traded commodity many times over. Gradually, however, more and more investors drop out to profit from their gains. The price begins to fall. The associated panic selling sets off a chain reaction. More and more investors sell and the price plummets.

THE MOST FAMOUS STOCK MARKET CRASHES IN HISTORY

1637 The first stock market crash - the Dutch Tulip Crisis
The first stock market crash in history was caused by tulip bulbs. As demand increased, the tulip trade increasingly developed into a speculative bubble. After an explosion in prices, the price finally crashed and the first bubble in history burst.

1720 The South Sea Bubble and the Mississippi Company Crash
The South Sea Company was a company that took over the national debt from the British Empire. In return, the company received an interest rate of about 6% and a monopoly on trading business in South America. Most importantly, the South Sea Company was given permission to issue its own shares to finance the debt assumption. Statements about highly profitable business in South America and promised dividends kept heating up the share prices. At the same time, the same scheme was implemented in France - in the form of the Mississippi Company.
The enthusiasm developed into a veritable hysteria - until the promised dividends were never paid and the founders of the South Sea Company had already fled abroad. One of the most serious economic crises in Europe followed.

1929 Black Friday ends the Golden Twenties
In October 1929, a huge speculative bubble burst on the stock market in the USA. The economic boom of the post-war period thus came to an end. The day went down in the history books as Black Friday and triggered the biggest economic crisis of all time.
To protect and strengthen the domestic economy, the U.S. implemented a merciless protection policy. Foreign imports were made more difficult and support loans, on which European countries had been heavily dependent after the war, were withdrawn by banks. As a result, the American economic crisis spread to the entire world.

2000 The dotcom bubble bursts
At the center of this bubble was the burgeoning Internet industry. More and more freshly founded Internet companies sprang up. Fast growth was the primary goal. Many of the new Internet companies therefore went directly public - to raise growth capital for investment.
Characterized by high sales and profit expectations for the future, the prices of these technology stocks soared to heights never before reached. It quickly became apparent that the high expectations could not be fulfilled. In 2000, share prices finally plummeted and the numerous new start-ups disappeared as quickly as they came.

2008 The US real estate bubble bursts
At the turn of the millennium, a lot of money was printed to avert an impending economic crisis. At the same time, interest rates fell and cheap money in the form of loans flooded the USA. Numerous Americans were able to finance their dream of owning their own home - the real estate industry boomed.
After some time, the U.S. Federal Reserve raised the prime rate, which also caused mortgage rates to rise and many borrowers were no longer able to repay their mortgages. They had no choice but to sell their new homes again.
The more borrowers had to sell their homes, the more real estate prices fell across the country. The sale of the property thus no longer generated enough money to pay off the high loans.
The banks could no longer get back the money they had lent - one bank crash followed another. Towards the end of 2008, the world-famous investment bank Lehman Brothers also went bankrupt. With far-reaching consequences - the financial crisis had reached its peak and spread to the whole world.