Hi, Guys. After sharing some technical blogs; sensational 90's kids memory; hidden facts about Christmas, I would like to share a sensitive topic “Recession” which been the reason for distress among youngsters. Even for the people working in corporate sectors. OK in general what is recession? Why it is happening? Let this blog create some awareness about recession.
WHAT IS RECESSION?
In general it is defined as a period of temporary fall in the economy which affects the trade and industrial activity. It is also identified by the fall in GDP (Gross Domestic Product is a financial measure of market value of all final goods and services produced annually) in two successive quarters. It occurs generally when there is global drop in spreading.
The term recession is triggered by various events such as financial crisis; an external trade stock; adverse supply stock or bursting of economic bubble.
In United States, recession is defined as significant decline in economic activity which last for few months reflects in normal GDP; income; employment; industrial production; and wholesale-retail sales.
RECESSION IN 2008
It results in rise of unemployment rate; fall off consumer purchases; business and go bankrupt.
Unemployment rate results in 16,000 people lost job approximately in Jan 2008; People lost their homes where housing prices falls 10 percent in 2008; Business and go bankrupt: In 2008 many business order’s got declined is comparably 6 percent higher than previous year. Additionally many youngsters suffered a lot to get employed those times.
TYPES/SHAPES OF RECESSION
According to economist’s recession is divided into to following types: V-shaped; L-shaped; U-shaped; and W-shaped.
V-shaped: it is also called as short/sharp contractions followed by rapid and sustained recovery occurred in 1954 and 1990-91; U-shaped also called as prolonged slump occurred in 1974-75; W-shaped also called as double-dip recession occurred in 1949 and 1980-82; and L-shaped occurred in 1997-99.
In 1993-4 Japan faced U-shaped recession; in 1997-98 Korea, Hong Kong, and South East Asia experienced U-shaped recession; and Thailand faced eight consecutive quarters of decline called L-shaped recession.
CAUSES FOR RECESSION
There are many theories and factors have been identified which directly results in economic slowdown. Some of the common factors are explained below:
High Bank Rates: Due to high rate of interest, there is no cash flow in the market. This results in fall of investment and eventually leads to recession. In 1980, USA faced stagflation (unemployment and fall in economy).
Stock Market: In the market, the investors try to pull the money out of the stock will result in draining of capital amount invested in the business. Crashes in the stock market are very harmful to economy.
Housing Crisis: During 2007, prices of the houses has been reduced which affects the owners losing their equity. So the owners not able pay their mortgages or take second mortgages on their homes leads to foreclosure.
Economic scandals and frauds: At times many banks; corporate sectors; even government institutes follow up dishonorable practices to boost profitability. When those schemes and illegal methods are exposed in practice it results in suffering of entire economy. Best example is financial scandal of Sahara.
Effects of war: It’s very usual that after war there will be drastic fall in the economy due to the distress faced by the people in all sectors.
Deflation: It is just opposite of inflation that is reduction. During this period there will be decrease in the price of commodities and services. Because of that the consumers will wait until the price reduce further results in recession.
Falling wages: If the salaries and wages of the employees is not increased as per inflation in the economy, the public purchasing level will be reduced. So the public cannot get afford the same goods and services they used so far. This leads to economic slowdown.
Summarizing recession is not an easy task, but i tried sharing the hint of recession. Hope this will be helpful to get a clear view of recession.
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