VIEWS: 4 PAGES: 2 POSTED ON: 4/23/2011
?What is a recession and what happens during this time? A recession usually happens when there is a significant decline in the economy which usually lasts for a short period of time. You can tell there is one when consumers don't spend that much, a lot of people are unemployed, companies have to make job cuts, industrial production is down and lately, there is a housing crisis as people have to foreclose their homes. The technical indicator which tells you that the country is in a recession is when there has been 2 consecutive quarters of negative growth which is measured by the country's GDP or gross domestic product. Experts say that this is bound to happen because it is part of the business cycle and things usually improve within 16 to 18 months. What then is a business cycle? It is considered to be a periodic but irregular up- and-down movement in a country's economic activity which can be measured by fluctuations in the GDP as well as other macroeconomic variables. Things go up when the economy recovers and expands. The situation goes the opposite direction when the market experiences a slowdown until it eventually reaches a recession. The last time the United States had a recession was in 2000 and this lasted for three negative quarters until 2001. Experts hope that the same thing will happen right now but this could change as the stock market has had a roller coaster ride these past few weeks and a bailout which was just approved recently will try to make things better. But there has never been such a drastic move when the country was in recession. In the past, lowering interest rates was the solution. In recent days, the Federal government slashed the interest rate three times towards the end of the third and fourth quarter so that banks could get overnight loans. The recession in the United States has affected other countries and drastic steps have been taken to prevent it from getting worse. Britain unveiled plans to inject billions of pounds into its biggest retail banks. Members of the European Union agree that there must be reforms in the world's financial system. With this very gllomy picture being painted, people are asking Is there light at the end of the tunnel? The answer is yes but it is going to be some time before anyone will see any improvements. In fact, this crisis will continue on to whoever governs the country. The 'right' government will be able to help the people cushion the impact of a global slowdown. The 'wrong' government will cause severe hardship to the people. You can basically see it on the ground. It comes down to "Does the government fear the people?" or "Do the people fear the government?". The government plays a significant role in helping the country through these tough times. A good government will embark on tax breaks, reduce the cost of funds by lowering interest rates, abolish some taxes and even go further like control prices of essential items. When the government does this, it is in the hope that industries will lower cost of goods and services to the consumers. The focus of a good government will be on the lower income group because this group is the hardest hit during a recession. So during a recession, what can a person do? Depending on each person's cashflow position, one would be prudent to embark on some austerity drive to reduce debts, obligations and stretch the dollar to the maximum. Additionally, it is often wise to seek out other avenues of income and learn new skills. Want to learn a new skill to create a new income stream? Learn about it .
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