What Causes An Economic Recession
An economic situation in which a country's gross domestic product or output is sustaining a negative growth for at least two consecutive quarters or six months is called an economic recession. For the National Bureau of Economic Research (NBER), "recession is a significant decline in economic activity lasting more than a few months".
Economic recession lasts for eleven months and may reach until two years. While a recession that is short lived is called economic correction. Meanwhile a sustained recession turns into a depression.
What causes recessions to happen?
There are complex reasons as well as simple reasons why economic recessions happen. John Maynard Keynes states that there are "animal spirits" as driving elements for a recession. "Animal spirits" could be confidence, uncertainty, and pessimism. These "animal spirits" prevent objectivity and quantitative analysis.
An example where these "animal spirits" take over, is when consumers lose interest on products and outputs. On the eve of an economic recession, there will be overproduction. Supply will exceed the demands of products and goods.
This will push companies to increase prices and consumers will lose confidence and will be uncertain in purchasing products. Until the event that consumers will stop buying. Another example for this element driving recession will be the psychological impact the events of the September 11 attacks on consumers and the people then the housing crisis left many seeking a reverse mortgage.
Some economists suggest that recession may not only be caused by events that have large or huge impact on the people. Events that hurt particular companies or industries can also cause recession. Major innovations or change in a price of a major component needed in the completion of the product can have dramatic effects on some firms. These may cause reduction of workers or production.
Overconsumption can also be a cause of recession. Spending more that what is necessary may lead to recession and poverty. And example will be the major fuss over the expenditure of the United States in the Iraq war. Economists are saying that the United States should be careful with their consumption in the future.
Government economic policies can be used to avoid economic recession. But failure to provide good economic policies can lead to recession. There are some errors that can be made in economic policies. There are some economic policies that can lead to a boom and bust. This means that the economy is running in an unsustainable pace. Inflation is increasing.
Another policy error is that the policymakers themselves are not attentive enough to see the increasing inflation and onset of recession. Policymakers often times regard the onset of recession as just a slow economic growth and will correct themselves. But failure to address this may lead to more economic disasters.
Economic recession is not just a United States issue. The United Nations expressed an alarm that there might be a global economic recession as early as January 2008. According to United Nations, world economic growth for 2008 is estimated to be on 3.4 percent, flowing from the down trend since 2006 (3.9 percent) and 2007 (3.7 percent).
The bursting of the housing market bubble of the United States and the unfolding credit crisis of other countries are some contributing factors for a global recession. Currently, Latvia, Estonia and Lithuania are in risk of experiencing economic recession due to credit crisis.
To summarize, economic recession can be brought about by external as well as internal economic shocks and widening imbalances in the economy. Numerous ways can cause recession. Steps can be undertaken to avoid altogether this kind of economic scenario to happen. But the most difficult part is to recover from the impacts of this economic turmoil.
2010年10月16日星期六
How Can You Survive During an Economic Recession
How Can You Survive During an Economic Recession
An economic slowdown can happen at any time so you should be prepared for it. Here a few tips so you don't get caught with your pants down until things get better.
1. If you are in debt, get out as quickly as possible. If you need help, see if you can consult with a financial adviser who can help set your budget for you. Try a reverse mortgage as it may allow you to draw money out of your home if owned.
2. You should also switch your bills to cheaper services. This includes electricity, gas, mobile phone, television broadband packages, insurance and maybe even your bank account.
3. There should also be cuts in daily spending. If you buy a lot in the grocery, see to it that you finish whatever there is first before you decide to replenish it. If there are items in promo, buy them instead of what you buy usually because they could be just as good or even better than what you are used to getting.
4. See if you can get free samples. This may sound silly but you are sure to find a few every time you visit the grocery. You can also cut out some vouchers in magazines and then redeem it on your next visit.
5. For those who go to work, instead of going out and having lunch, make it at home then bring it with you to the office. This includes coffee which you can put in a flask if there isn't any being offered.
6. You should also conserve on energy by lowering your electricity bills and fuel costs. Perhaps you can ask your boss if you can work at home two or three times a week. If this is not possible, see if you can carpool with someone from the office.
7. If you own a large vehicle, perhaps it is time to sell it or trade it in for a smaller one because of better mileage.
8. As for your electricity, see if you can change your light bulbs to those with lower wattage. Perhaps you can also put your heater down by one degree, reinsulated the place or stop drafts coming from the windows and doors.
9. Reducing your expenses are not the only ways to survive an economic recession. You can also make money by selling some stuff in a garage sale or renting out a spare room if there is someone out there who needs a place to stay.
10. If you work in an industry that gets badly hit when cash is tight, perhaps it is time to switch to another career that is more stable.
11. Since that will take some time and you will have to go to school for awhile, you can also engage in some other business on the side like bake cookies or sell some of your vegetables in your garden. Everyone has a niche so you just have to know what it is.
12. The last thing you can do to survive an economic recession is to take advantage of the situation. If you have the money, invest in long term investments so you can sell it when the economy has improved.
An economic recession is a fact of life and this often lasts for months, which is why it is better to be prepared. You should remember that your ability to stay financially stable is the only way you can deal with a potential loss of income and also inflated prices.
An economic slowdown can happen at any time so you should be prepared for it. Here a few tips so you don't get caught with your pants down until things get better.
1. If you are in debt, get out as quickly as possible. If you need help, see if you can consult with a financial adviser who can help set your budget for you. Try a reverse mortgage as it may allow you to draw money out of your home if owned.
2. You should also switch your bills to cheaper services. This includes electricity, gas, mobile phone, television broadband packages, insurance and maybe even your bank account.
3. There should also be cuts in daily spending. If you buy a lot in the grocery, see to it that you finish whatever there is first before you decide to replenish it. If there are items in promo, buy them instead of what you buy usually because they could be just as good or even better than what you are used to getting.
4. See if you can get free samples. This may sound silly but you are sure to find a few every time you visit the grocery. You can also cut out some vouchers in magazines and then redeem it on your next visit.
5. For those who go to work, instead of going out and having lunch, make it at home then bring it with you to the office. This includes coffee which you can put in a flask if there isn't any being offered.
6. You should also conserve on energy by lowering your electricity bills and fuel costs. Perhaps you can ask your boss if you can work at home two or three times a week. If this is not possible, see if you can carpool with someone from the office.
7. If you own a large vehicle, perhaps it is time to sell it or trade it in for a smaller one because of better mileage.
8. As for your electricity, see if you can change your light bulbs to those with lower wattage. Perhaps you can also put your heater down by one degree, reinsulated the place or stop drafts coming from the windows and doors.
9. Reducing your expenses are not the only ways to survive an economic recession. You can also make money by selling some stuff in a garage sale or renting out a spare room if there is someone out there who needs a place to stay.
10. If you work in an industry that gets badly hit when cash is tight, perhaps it is time to switch to another career that is more stable.
11. Since that will take some time and you will have to go to school for awhile, you can also engage in some other business on the side like bake cookies or sell some of your vegetables in your garden. Everyone has a niche so you just have to know what it is.
12. The last thing you can do to survive an economic recession is to take advantage of the situation. If you have the money, invest in long term investments so you can sell it when the economy has improved.
An economic recession is a fact of life and this often lasts for months, which is why it is better to be prepared. You should remember that your ability to stay financially stable is the only way you can deal with a potential loss of income and also inflated prices.
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