Devaluation in the context of "Sovereign default"

The antoninianus or pre-reform radiate was a coin used during the Roman Empire thought to have been valued at 2 denarii. It was initially silver, but was slowly debased to bronze with a minimal silver content. The coin was introduced by Caracalla in early 215 AD. It was silver, similar to the denarius, except that it was slightly larger and featured the emperor wearing a radiate crown, indicating it was a double denomination. Antoniniani depicting women (usually the emperor's wife) featured the bust resting upon a crescent moon.

Even at its introduction, the silver content of the antoninianus was only equal to 1.5 denarii. This created inflation: people rapidly hoarded the denarii (Gresham's law), while both buyers and sellers recognized the new coin had a lower intrinsic value and elevated their prices to compensate. Silver bullion supplies began running short because the Roman Empire was no longer conquering new territory, the Iberian silver mines had been exhausted, and a series of soldier emperors and usurpers needed coin to pay their troops and buy their loyalty. Each new issue of the antoninianus thus had less silver in it than the last, and thus contributed to ever-increasing inflation.

The euro area crisis, often also referred to as the eurozone crisis, European debt crisis, or European sovereign debt crisis, was a multi-year debt crisis and financial crisis in the European Union (EU) from 2009 until, in Greece, 2018. The eurozone member states of Greece, Portugal, Ireland, and Cyprus were unable to repay or refinance their government debt or to bail out fragile banks under their national supervision and needed assistance from other eurozone countries, the European Central Bank (ECB), and the International Monetary Fund (IMF). The crisis included the Greek government-debt crisis, the 2008–2014 Spanish financial crisis, the 2010–2014 Portuguese financial crisis, the post-2008 Irish banking crisis and the post-2008 Irish economic downturn, as well as the 2012–2013 Cypriot financial crisis. The crisis contributed to changes in leadership in Greece, Ireland, France, Italy, Portugal, Spain, Slovenia, Slovakia, Belgium, and the Netherlands as well as in the United Kingdom. It also led to austerity, increases in unemployment rates to as high as 27% in Greece and Spain, and increases in poverty levels and income inequality in the affected countries.

Causes of the euro area crisis included a weak economy of the European Union after the 2008 financial crisis and the Great Recession, the sudden stop of the flow of foreign capital into countries that had substantial current account deficits and were dependent on foreign lending. The crisis was worsened by the inability of states to resort to devaluation (reductions in the value of the national currency) due to having the euro as a shared currency. Debt accumulation in some eurozone members was in part due to differences in macroeconomics among eurozone member states prior to the adoption of the euro. It also involved a process of cross-border financial contagion. The European Central Bank (ECB) adopted an interest rate that incentivized investors in Northern eurozone members to lend to the South, whereas the South was incentivized to borrow because interest rates were very low. Over time, this led to the accumulation of deficits in the South, primarily by private economic actors. A lack of fiscal policy coordination among eurozone member states contributed to imbalanced capital flows in the eurozone, while a lack of financial regulatory centralization or harmonization among eurozone member states, coupled with a lack of credible commitments to provide bailouts to banks, incentivized risky financial transactions by banks. The detailed causes of the crisis varied from country to country. In several EU countries, private debts arising from real-estate bubbles were transferred to sovereign debt as a result of banking system bailouts and government responses to slowing economies post-bubble. European banks own a significant amount of sovereign debt, such that concerns regarding the solvency of banking systems or sovereigns are negatively reinforcing.

An economic depression is a period of carried long-term economic downturn that is the result of lowered economic activity in one or more major national economies. It is often understood in economics that an economic crisis and the following recession that may be termed an economic depression are part of economic cycles where the slowdown of the economy follows economic growth and vice versa. It is a result of more severe economic problems or a downturn than a recession itself, which is a slowdown in economic activity over the course of the normal business cycle of growing economy.

Economic depressions may also be characterized by their length or duration, showing increases in unemployment, larger increases in unemployment or even abnormally large levels of unemployment (as with for example some problems in Japan in incorporating digital economy, that such technological difficulty resulting in very large unemployment rates or lack of good social balance in employment among population, lesser revenues for businesses, or other economic difficulties, with having signs of financial crisis, that may also reflect on the work of banks, or may result in banking crisis (in various ways that may be for example unauthorized transformations of banks), and further the crisis in investment and credit; that further could reflect on innovation and new businesses investments lessening or even shrinking, or buyers dry up in recession and suppliers cut back on production and investment in technology, in financial crisis that may be more country defaults or debt problems, and further in feared businesses bankruptcies, and overall business slowdown. Other bad signs of economic depression could be significantly reduced amounts of trade and commerce (especially international trade), as well as in currency markets that maybe fluctuations or unexpected exchange rates with observed highly volatile currency value fluctuations (often due to relative currency devaluations). Other signs of depression are prices deflation, financial crises, stock market crash or even bank failures, or even specific behaviour of economic agents or population, that are also common or also non common elements of a depression that do not normally occur during a recession.

A currency crisis is a type of financial crisis, and is often associated with a real economic crisis. A currency crisis raises the probability of a banking crisis or a default crisis. During a currency crisis the value of foreign denominated debt will rise drastically relative to the declining value of the home currency. Generally doubt exists as to whether a country's central bank has sufficient foreign exchange reserves to maintain the country's fixed exchange rate, if it has any.

The crisis is often accompanied by a speculative attack in the foreign exchange market. A currency crisis results from chronic balance of payments deficits, and thus is also called a balance of payments crisis. Often such a crisis culminates in a devaluation of the currency. Financial institutions and the government will struggle to meet debt obligations and economic crisis may ensue. Causation also runs the other way. The probability of a currency crisis rises when a country is experiencing a banking or default crisis, while this probability is lower when an economy registers strong GDP growth and high levels of foreign exchange reserves. To offset the damage resulting from a banking or default crisis, a central bank will often increase currency issuance, which can decrease reserves to a point where a fixed exchange rate breaks. The linkage between currency, banking, and default crises increases the chance of twin crises or even triple crises, outcomes in which the economic cost of each individual crisis is enlarged.

The 1973–1974 stock market crash caused a bear market between January 1973 and December 1974. Affecting all the major stock markets in the world, particularly the United Kingdom, it was one of the worst stock market downturns since the Great Depression, the other being the 2008 financial crisis. The crash came after the collapse of the Bretton Woods system over the previous two years, with the associated 'Nixon Shock' and United States dollar devaluation under the Smithsonian Agreement. It was compounded by the outbreak of the 1973 oil crisis. It was a major event of the 1970s recession.

All the main stock indices of the future G7 bottomed out between September and December 1974, having lost at least 34% of their value in nominal terms and 43% in real terms. The recovery was a slow process. West Germany's market was the fastest to recover, returning to the same level by June 1985. The United Kingdom returned to the same market level by May 1987, but this full recovery lasted for only a few months and ended with the Black Monday crash of 1987. The United States returned to the same market level by August 1993, over twenty years after the 1973–74 crash began.

The Mexican peso crisis was a currency crisis sparked by the Mexican government's sudden devaluation of the peso against the U.S. dollar in December 1994, which became one of the first international financial crises ignited by capital flight.

During the 1994 presidential election, the incumbent administration embarked on an expansionary fiscal and monetary policy. The Mexican treasury began issuing short-term debt instruments denominated in domestic currency with a guaranteed repayment in U.S. dollars, attracting foreign investors. Mexico enjoyed investor confidence and new access to international capital following its signing of the North American Free Trade Agreement (NAFTA). However, a violent uprising in the state of Chiapas, as well as the assassination of the presidential candidate Luis Donaldo Colosio, resulted in political instability, causing investors to place an increased risk premium on Mexican assets.

The Mexican peso (symbol: $; currency code: MXN; also abbreviated Mex$ to distinguish it from other peso-denominated currencies; referred to as the peso, Mexican peso, or colloquially varo) is the official currency of Mexico. The peso was first introduced in 1863, replacing the old Spanish colonial real. The Mexican peso is subdivided into 100 centavos, represented by "¢". Mexican banknotes are issued by the Bank of Mexico in various denominations and feature vibrant colors and imagery representing Mexican culture and history. Modern peso and dollar currencies have a common origin in the 16th–19th century Spanish dollar, most continuing to use its sign, "$".

The current ISO 4217 code for the peso is MXN; the "N" refers to the "new peso". Prior to the 1993 revaluation, the code MXP was used. The Mexican peso is the 16th most traded currency in the world, the third most traded currency from the Americas (after the United States dollar and Canadian dollar), and the most traded currency from Latin America. As of 11 November 2025, the peso's exchange rate was $18.32 per U.S. dollar, $13.07 per Canadian dollar, $24.07 per Pound sterling and $21.21 per Euro.