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Behind the Hitch: The Causes of Economic Recession
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.
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.
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My Articles
Economic Recession: A Wake Up CallEconomic Recessions Are Normal
How To Survive In An Economic Recession
Economic Recession, Tips To Deal With It
What Economic Recession Is All About
Teaching Your Kids To Save During Recession
Behind The Hitch: The Causes Of Economic Recession
On The Dole: The Effects Of Economic Recession On Employment
Economic Recession And What It Can Do To You
Far-Reaching Economic Recession
How Can Your Business Survive An Economic Recession
How To Save In Times Of Economic Recession
Young And Jobless: The Effects Of Economic Recession On The Youth
How Can You Survive During An Economic Recession
The History Of The American Economic Recession
Economic Recession: What You Should Do To Prevail
Economic Recession And How To Deal With It
Redundant Women: The Effects Of Economic Recession On Women
What To Watch Out For During Economic Recession
Collateral Damage: Suicide And Economic Recession
Defining An Economic Recession
What Is An Economic Recession
How To Survive The Economic Recession
Road Sign Ahead: Signs Of Economic Recession
My Articles The History Of The American Economic Recession This year, there have been murmurs that the United States is entering, again,.. Economic Recession: A Wake Up Call Economic recession is an event that nobody seems to be happy hearing. Every.. Economic Recession And How To Deal With It Economic recession may be a new term in your ears but in.. How To Survive The Economic Recession People in the prehistoric times are not the only ones in survival.. |
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