Sample Essay
The distress may lead to a call for liquidity as investor try to turn the assets into money. When this occurs, some speculative borrower end up being unable to repay their debts since the prices of assets are dropping persistently. Withdrawing from investment in long term assets remains the only resolution since a crisis is almost to occur.
To overcome the distress people investors dispose their assets at high prices but upon realizing that there prices of assets are relatively low and many firms begin to declare bankruptcy. Lack of sufficient money within an economy to purchase assets is referred to as revulsion. Revulsion makes banks and financial institutions to stop collecting assets as collaterals for credit. Since the prices of assets get so low, the only last option for firms is to shut down or be liquidated.
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