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Economic Recession, An Unwelcome Visitor

Recession, an unwelcome visitor, is hated by everyone. The fear of unemployment, lay offs, retrenchments, market crashes, bankruptcy, etc., are the direct impact of recession which no one likes to face. What is certain is that one cannot easily escape its wrath directly or indirectly and we should learn to live with it. It is better that we know what exactly is an economic recession.

When there are two consecutive of negative growth in terms of the GDP it is termed as technical recession in most countries. Naturally it sends panic waves among people and the whole economy declines. However the signs of recession is palpable even before it actually settles in. The consumers get scared and spend little, unemployment increases, there is drastic drop in the industrial output and the stock markets become more volatile and unpredictable.

It is the opinion of experts that in most cases an economic recession shows its virulence for a period of one to two years.

Is it possible for governments to stop recession?

The hardship caused to people due to recession make people think that the government is at fault. The fact is that recession causes deflation and in order to save the economy the government has to contribute lots of funds to enhance liquidity. This may have an after effect of causing increase in rate of inflation resulting in stagnation. Under this scenario governments are reluctant to move decisively on whether to increase liquidity and reduce the rate of inflation.

-The onset of economic recession

It is a common observation that rich get always richer whereas poor get poorer. The rich always aim at getting further richer and at any instance of an emerging opportunity they speculate the market with the intention of making money. This prompts the rest of the population who are lured to the opportunity of making some quick cash. The net result of the efforts of poor and middle income groups in this field make the market voluminous where no one takes notice of the supply and demand factor. The bubble burst in no time resulting in catastrophic effect on the economy so rapidly. As a matter of fact the rich will somehow withdraw before the bubble explodes and the real sufferers will be the majority of the population consisting of poor and middle class people and it is now the government intervene to salvage the economy.

-Stages in an economic recession

The stages in an economic slowdown is cyclic with a period of slow down, recession, recovery and expansion. The period of slowdown is normally momentary and lasts for short period whereas the period of recovery and expansion lasts longer. The greed of people tempt them to go after money during the expansion period when the market is hot and it has the consequence of loosing. Investment during recession period is ideal as everything will be at their cheapest but most people learn this so late

-Is it possible to escape recession?

As a common measure to overcome recession the governments usually reduce the interest rates to revive the economy. This move of the government should be done cautiously as it may cause inflation. This eventually results in poor spending from the customer dampening the economy further. This tendency may continue to last until conditions improve. It is also observed that the economic bubble is so huge which may last for prolonged period causing economic recession continue causing untold misery to people. The economic recession of the nineteen thirties is a typical example.

So what is it all about?

One should learn that making money by investing in stock market is quite possible. However the greed to make more money by chasing the market should be avoided. One should be prudent enough to know when to buy and what to buy. A careful study of the market trend can help an investor to make wise decisions. This should be based on a long term vision and not on speculation. A person who can plan well to accumulate funds during good times and buy during recession when it will be cheap. Hold and sell when the value goes up during good times earn more again. Such a careful planner will become rich beyond all doubts. It is noteworthy that the above said cycles appear rarely in ones lifetime. A wise person makes best use of such opportunities. The reputation should be checked to choose the best bankruptcy attorney in san diego through the applicant. All the opportunities available should be grabbed for pleasant experience with reasonable charges.

Paola

Paola Garcia lives in Jakarta Indonesia. She is an associate professor in University of Indonesia and also managing Scoopinion at the same time. She is also fond of watching theatrical plays.

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