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What Is An Economic Recession?

Updated on January 16, 2015

Economic Recession

The Return of Depression Economics and the Crisis of 2008
The Return of Depression Economics and the Crisis of 2008

In this major bestseller, Paul Krugman warns that, like diseases that have become resistant to antibiotics, the economic maladies that caused the Great Depression have made a comeback. He lays bare the 2008 financial crisis—the greatest since the 1930s—tracing it to the failure of regulation to keep pace with an out-of-control financial system. He also tells us how to contain the crisis and turn around a world economy sliding into a deep recession. Brilliantly crafted in Krugman’s trademark style—lucid, lively, and supremely informed—this new edition of The Return of Depression Economics has become an instant classic. A hard-hitting new foreword takes the paperback edition right up to the present moment.


What Economic Recession is all About

Economic recession is gripping the United States right now and people just don't know what to do about it. In truth, economic recession isn't something new anymore. In fact, it has been happening all throughout the decades. People don't just know about it because it has not been as widely publicized as now. This is perhaps because of the ongoing political race between the Republican and the Democrat. And maybe also because, the country has never experienced such downturn in economy than now, with losses in the real estate, banking and insurance sectors.

Economic recession is actually a term used to refer to the slowing down or downturn of the economy after a period of upturn. You can better picture it with a cycle that often turns. Economy is sometimes rosy and bullish but after a period of progress, it will slow down and become bearish as what they use in the stock market.

The cycle of economy

Often, economic recession is not a problem as the government's financial sectors have solutions for it. One of the most common is tax cuts where the government gives up a portion of their income and gives it back to the people so that they will have money to buy goods. When consumerism becomes good again, companies who lost a lot of money during the period of downturn and low demand will regain their losses. This will lead to the hiring of new people and increasing their production. More supply in the market will lead to lower prices which will hopefully encourage higher demand for products. Thus, ending the recession.

Easier said than done

It is however easier said than done. Sometimes even with tax cuts, the government cannot balance the economy. This is especially true if the country do not have much budget to augment the situation or if there have been occurrences that are outside their control.

For instance, the problems in the real estate industry and near bankruptcy of a lending firm associated with properties are not exactly brought on alone by economic recession. Problems in the company way way back have contributed to its losses, only aggravated by the current economic situation. The same goes with the problems several banks in the United States are experiencing right now and also the losses that are beginning to show from the portfolio of a multinational insurance and financial firms.

All these are not all the fault of economic recession. However, what is happening to these companies is made much worse by the economic downturn as people will not spend as much. Because of the hard times, some will not also be able to pay their loans or pay off their mortgages like before. If a company has a solid money background, it will not matter as its assets can absorb the losses.

Although economic recession is basically something that happens to a country, individuals are affected not only in the country where it is happening but also worldwide. This is especially true if the company has interest worldwide or the currency is being used all over the world. There is however not much that people can do except take a calming breath and just take one day at a time, hoping it will all come to an end soon.

Economic Recession and You!

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What is economic recession?

A formal definition states that an economic recession occurs when there is a negative growth in gross domestic product for two consecutive quarters. Ahbi, S. (2009). Ahbi, S. (2009).

Economic Recession: A Wake Up Call

Economic Recession: A Wake Up Call

Economic recession is an event that nobody seems to be happy hearing. Every time recession is being mentioned in casual conversations, it seems that everybody participating shudder in fear anticipating the worst.

An economic recession is an economic slowdown that happens in two consecutive quarters. Some economists would say that this is associated with series of events that generally recognized to be ìmarket correctionî. What is this series of events?

An economic recession happens when there is more supply than the actual demand of the product. This leads to a decline in the gross domestic product. What happens during economic recession is that it provides a ìcooling offî period for creating on new products that will interest the consumers and of necessity.

When compared to agriculture, it is common sense among farmers that the land needs an time interval between the harvesting season and next planting season. Sometimes farmers would plant a different kind of seed that is known to bring and enrich the land again for the next planting season. Somehow this applies in financial and trade markets.

Some businesses would see economic recession as the time to reinvent. Time to innovate and create new products that will create a market hype and again will encourage consumers to purchase goods. Many businesses who have switched their attention in innovating during economic recessions show high probabilities of succeeding.

Since there is a large selection of products in market trying to capture the unmindful consumers, the period of recession accelerates the quality of products being available in the market. Since companies are trying to get the consumer's money, they would likely to produce improved product quality, improved services at lower prices.

Since there are products that would not sell, this would push companies and sellers to inspect their production methods. This is a good time in filtering out production methods and equipment that compromises the quality, efficiency and speed of creating products.

An economic recession also serves as a wake-up call for everyone to have a balanced spending. Everyone gets a heads-up about keeping saving accounts updated and saving for any event in the future. Unfortunately, some people may learn their lesson in the hard way. There would be some who would be declaring bankruptcy, while in worst cases, there are people who would choose to end their lives. Economic recession would be a good time to rethink a person's finances.

Some considerable benefits of economic recession is low housing prices. Unless, you're in the business of selling houses, low prices is not a good news. However, if you are somebody who is planning on investing and buying a property, a period of recession will help you have the choices that you want. It is also a good time to look for investment properties.

Housing prices are not the only one who has low prices, company stocks are often undervalued during economic recession. A person who is looking for long time stock investment, recession periods would have stocks that are undervalued because a lot of stock holders are more into selling that acquiring stocks.

MarketWatch mentioned other gains from an economic slowdown. MarketWatch mentioned that this would serve as a wake-up call for overconfident consumers and sellers who are missing out the importance of balancing finance. And also this would serve as a wake- up call for government to have a stricter finance budget since there will be cutback in the country's revenues.

Although economic recession is considered a negative event, it is time to turn the negative event into a positive situation. It is time to wake up

Double dip recession 2011: Economy 2012-2020

Economic Recession


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.

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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    • raymondphilippe profile image

      Raymond Philippe 3 years ago from The Netherlands

      Unfortunately it still is.

    • karinhistory profile image

      Karin 3 years ago

      Thanks for this info. It is stell relevant

    • C.S.Alexis profile image

      C.S.Alexis 8 years ago from NW Indiana

      This is information that needs to be sucked up like a sponge, we have to take charge of ourselves as individuals. Thanks for sharing.

    • profile image

      AmericasChoiceCredit 8 years ago

      This was really a great post, and this blog is really boosting my knowledge in the financial industry which is a great help as I run several credit websites, making it very important to get all the up to date finance info I can. Good luck to everyone in the new year.

      P.S. I definitely recommend subscribing to this blog's feeds, they are a wealth of information.

    • profile image

      Art Penz 8 years ago

      Great post!

    • profile image

      Dr Nowshad M 8 years ago

      Recession will be a part of the life in future. However, more important to think by everybody is the availability of food and water in future days as most people are not willing to do agriculture/aquacuture. Be prepared to face a food crisis and every family in the world has to contribute to produce food in addition to their main job. Without food no life. Also water will be costly in future, dont be lavish and try to tap the natural waters as far as possible.

    • Beckster profile image

      Beckster 8 years ago from Guernsey

      Here Here!

    • megamass profile image

      megamass 8 years ago from Portugal

      Great post! Thanks for the information!

    • Chef Jeff profile image

      Chef Jeff 8 years ago from Universe, Milky Way, Outer Arm, Sol, Earth, Western Hemisphere, North America, Illinois, Chicago.

      If the U.S. is going to dominate the world economy as we have done, then we need to be much more responsible for our economic moves. I would say we have been terribly irresponsible for some time now.

      If we are going to lead, then we need to act like a leader, not a speculator. that is my advice.


      Chef Jeff