Recession of 1980

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File:FSX.png
Forestia Stock Exchange Value, 1980-81

The Recession of 1980 was a major economic downturn that began in May 1980 and was caused by an extensive liquidity crisis in Ainin following the bursting of a property bubble that had been progressively building up since the economic deregulation of the late 1960s. It was characterised by an elevated rate of foreclosures, civil turmoil in several nations and a severe recession that had profound international implications.

Background

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Logo of Hartlybank

In 1967, the Aininian Conservative government deregulated the financial sector, privatising Ainin's state-run bank, at the time the largest. The newly-private bank was renamed the Bank of Hartly by its owners and appointed Anthony Adman as its chief executive officer. Under Adman, the bank, along with many of its competitors that followed suit, began lending heavily to people with poor credit records, in a practice known as subprime lending. Under these programmes, Ainin soon entered an unprecedented housing boom, with house prices rapidly increasing starting in 1969, creating a classic property bubble. In 1977, the bubble peaked, and prices began declining soon afterwards, causing the number of foreclosures to dramatically rise and the trade in mortgage-backed securities collapsed, causing the Bank of Hartly to catastrophically fail on May 4, 1980. In the two weeks that followed, Ainin's third- and fifth- largest banks also declared bankruptcy, with Adamson Limited doing so in the evening of May 5 and Jasper National doing so on May 9. That week proved to be disastrous, with the Forestia Stock Exchange dropping over 400 points between the afternoon of May 4 and the morning of May 10. As increasing numbers of corporations became stuck with toxic assets and millions of Aininians lost their savings when the banks failed, and the Bank of Forestia, then Ainin's second largest bank and a major international banking institution, teetered on the verge of bankruptcy, the Parliament of Ainin failed to arrange a bailout and the Bank of Forestia ceased trading later into the evening, sending shockwaves throughout the financial world.

Impact

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Ainin

In Ainin, the Recession hit particularly hard, with 22 million people being put out of work and the unemployment rate skyrocketing to 12%. Other stuff I'll write later.

Katranjiev

The Recession of 1980 affected Katranjiev, with unemployment rising from 2.5% in 1979 to 7.5% in 1980, with one of the three major banks of Katranjiev at the time, Iztochna Banka declaring bankruptcy in June 1980, causing substantial layoffs, while Banka Krasimir was close to declaring bankruptcy. In response, the Katranjian government gave Banka Krasimir and other banks bailouts, while the government instituted regulations to reduce the impact.

The swift actions made by the Katranjian government helped the economy recover, with the recession officially ending in 1984.