Recent Recession

The National Bureau of Economic Research defines economic recession as a significant decline in the economic activity spread across the economy, lasting more than a specified period. Recession can be associated with many different areas like sharply rising prices, falling prices, declines the employment, investment and overall corporate profits. Severe or long running recessions are known as depressions. The severe recession is known as high inflation or hyper inflation. This is the outcome of an economic collapse. A decline in GDP more than 10% is normally considered as a depression. The United States is enveloped by the recession from all the corners. The country once considered as one of the richest in the world is now facing the harsh reality of the recession largely due to its economical policies. United States economic recession has affected large number of employment and big corporate houses. Many renowned companies are now closed due to lack of business. The people are holding the spending power and as a result, the market is observing a draught of the buyers. The majority manufacturing companies have held their manufacturing since there is no demand and movement in the market for their products. The United States economic recession is not a new thing for the country. As the history reveals, in the past also the country had suffered a great setback due to the recession. The country had not experience the downturn in economy like the way it is passing through with the remarkable losses in real estate, banking, insurance and manufacturing of luxurious goods etc. The world is now observing United States in recession state and the rate of unemployment is increasing every day. Many expatriates were retrenched from their jobs, mainly Indian nationals, with an excuse that the country is now facing recession.

China is known for its growing economy at the cost of offering cheap labor sources for duplicating the products. China is widely known as the photocopy machine of the world, experts in duplicating the known products. In order to meet the massive requirements pouring in from the every corner of the world, China has millions of manufacturing units producing various types or original and duplicate goods throughout the day. Besides duplicating, many companies are assigning them the production work of their desired products. The Chinese goods are known for their cheap quality and prices and most people avoid it due to the malpractice in manufacturing. They have produced substitute items for every productive material and they are widely using those elements in manufacturing cheap products. They also produce quality products under the strict specification of the principal. China is the largest populated place and due to the cheap labor standards there, many manufacturers have shifted that manufacturing units in china in order to take greater advantage of the easily available labor. China offers skilled and unskilled labor for every manufacturing unit. China largely depends upon the production contracts awarded from the western countries mainly Europe and US. Since they don’t have their own specific productivity, they have to depend on these countries largely. So when these countries are affected by their created recession, China also got affected equally since there was no more production orders offered to china from other countries. As their own productivity, china has their own porcelain and handicraft products but that comes under the luxurious goods and demand for these types of products is always limited in the world. Most Chinese production houses are manufacturing various products as per the orders from the other customers. In this process they failed to generate their own identity for particular specialized products. Today China is also facing the recession despite the claims from their government that they maintain stable economy.

The economy fluctuates due to various reasons, as per the opinion of the economic analysts, by the uneven government policies and by the innate nature of the market. Fluctuations in the economy are now a natural element of life. The modern life has also to bear the political responses due to the fluctuations in the economy. With the sharp nosedive observed into the property market, many people prefer to invest their surplus resources into real estate. The interest rates on the loan to be issued goes down compared to the interest earned on the deposits. The major activity of any financial institute depends on the investment and to earn profit through various sources. They have lot deposit and so as to offer the interest on the deposit, they have to invest those deposits into some fruitful or beneficial investment. It has been observed that interest rates during recession go down as no one requires the commercial or personal loans from the bank. The government tries to excite the economy by lowering the interest rates in recession. Since the government is controlling the rate of interest, it makes easier for the bank to get liquidity. The lower rate of interest affects the business as they can get the loans on the favorable rates. The forex business declines due to lower value of the local currency against the strong foreign currency. Many business houses dealing with import or export business tend to keep their commercial activities on hold due to potential loss in the business. The interest on credit card normally does not decline but the new issues of credit cards offering better interest rates during recession. Recession and interest rates are related to each other; the rates are lowered during the recession and normalized once the recession is over. The interest rates on home equity loan and mortgage declines to some extent as banks have large surplus of funds to offer. Mortgages are long term debts so they react slower to short termed interest fluctuations.

The early recession 2001 was mainly observed in western countries affecting the European Union largely during the period of 2001 2003 recession. The U S economy was badly affected during recession 2002 followed by Canada and Australia. Country like Russia did not experience economical prosperity since 1990 observed some faint signs of improvisation. The recession phase touched many growing and developed countries including Japan and England. Most countries were hiding the lean phase of economy and economists of those countries were quite hopeful for the improvisation but things did not settle that way and the lean phase of recession continued further affecting badly to the economies of the country. The recession has largely affected the life of the people. Most work forces were retrenched from various commercial and industrial sector and they were left with no means to survive. Many of them had to opt for inferior jobs to support their existence. The markets were flooded with the goods but the purchasing power was missing. As a result, the production houses had to put a full stop on further manufacturing. Many economists object to characterizing it as a recession in the U S since there were not two consecutive periods of negative growth. During past recessions, the most severe economic impact invariably has fallen on the growing children. The child poverty increased double than the general population. During 2001 recession, the child poverty remained essentially flat while non elderly adult poverty increased remarkably. The recession that started during 2001 differs obviously from the earlier recessions. The current recession has nearly broken from the normal historical pattern. The recession that began since 2001 has continued its span till today and affected badly on the growing economy of all the countries. The vastly populated countries are affected more from the recession. The countries depending on other source for their economy are suffering the most such as China and other far eastern countries. There are countries highly dependent on their parent countries are the worst victims of the bad patch than others. Countries like Pakistan, Philippines and other far eastern countries are mainly depending on U S. They cannot survive without the financial aids from U S and development in these regions is just negligible. Their economy is never developed due to the readymade aid available from their principal. Due to the failure in financial sector, the unemployment has increased throughout the world.

Europe will suffer deeper and longer recession than its earlier version and it would badly affect the economy of the European Union. The estimate has marked a remarkable downfall and it may convert into one of the worst recession after the world war second. The present state of recession may be stretched till the next year when both the euro zone and EU economies would shrink further to a negligible extent. During the spreading of European recession, one of the biggest export oriented country - Germany - would be expected to suffer a setback as the demand of their products has reduced in the world market. Many small associate countries of Europe would experience a bad scenario of the recession which they have not seen earlier as their economies are shrinking to a great extent. The plans of recovery have already been implemented to boost the limp economic activity; Europe would observe a notable rise in unemployment and government deficits. Europe may suffer from mass unemployment and as expected, nearly 8.5 million people would be axed from their jobs. The European economy is surrounded by the worst ever recession in Europe and it would take at least couple of years to sort out their economical problems and restore normal situation. The ambitious measures have been implemented by their governments and central banks in these exceptional circumstances. Government efforts to support slumping economies were expected weigh heavily on the public deficits and the gross domestic products are expected rise to some reasonable extent.  The union of 27 European countries is now facing the effects of recession and financial crises. The euro zone slump was driven by 0.6% fall in business investment while household spending delayed. The net trade was negative with exports showing only meager growth. EU nations are currently trying to stitch together an economic stimulus package worth approximately two hundred billion euros to deflect recession.

Recession could be termed as a slowdown in the rate of economic growth. The gross domestic product (GDP) declines remarkably. A severe recession is known as depression. Recession is mainly associated with falling levels of investment, rate of interest, rising unemployment and sharp decline in prices. The 1981 recession is known as severe recession as it ended during November 1982. The recession of 1981 was due to high inflation in the commodity market. The rate of unemployment rose to a great height but due to substantial economic growth, it was not affected that badly. During 1981 1982 recession, the most affected industries and business during the period of recession were housing, steel manufacturing, automobile and luxurious items experienced a downfall which had continued till the stretched period of the next recession. Many other supportive factors responsible in the development of those industries also suffered a great setback as their huge sum of money was just blocked for nothing due to the recession. In order to compress inflation out of the economy, the government had lowered the rate of interest on the loans issued and increased the rate of interest on the deposits so that people get some space to comfort themselves. The employment sector especially in rural area was affected very badly. Many people had to opt for part time jobs since full time jobs were retrenched due to recession. Since there was no new jobs were offered in the market, most people had stopped looking for the jobs. Only highly technically skilled jobs were available but the deserving candidates were already employed either with top local companies or in other countries where they found better opportunities. The recession in 1981 was most severe in the manufacturing sectors including farming, mining and import sensitive production of goods. Many rural areas are highly depending upon these sectors as the major workforce is being acquired from these areas to perform unskilled jobs. They are the class of people who earn on daily basis. During the joblessness condition, they had no work and they had to face the hardest time to survive.

GDP is the most affected element during the tough phase of recession. Gross domestic products refer to total goods and services produced in a country. Unemployment used to be the major output during the recession. Many corporate sectors, industrial zones and private sector start retrenching people due to unproductiveness in business. GDP and recession are related to each other. During the state of recession, most people put a break on their spending and try to save as much as possible. Large amount of people are removed from the employment and they are now remaining idle without offering their services anywhere. The manufacturing units are also become stagnant due to lack of movement into the goods. In order to save as much as possible, people are opting for the cheaper alternatives of their regular consumption and somehow prepares themselves to face the hardship of recession. Compared to urban, rural employees are affected more since most of them are unskilled workers and mainly engaged into construction activities. They are the people who earn on a daily wages. If they work, they get money else they have to bear the consequences of the hardship. Since the economy of the nation is slowdown, government is taking all the necessary measures to get rid of the recession and increase the GDP. The GDP growth recession declines sharply as most people hold the purchasing power. Due to unemployment, people are scared to take loans from the bank as they see no source to return the loan in time. To survive from the recession, many people they start discarding their valuables or properties. It is not possible that they get the right price for their belongings but they have to somehow compromise with the prevailing situation as survival becomes the prime necessity for them. To encourage the GDP recessions, the government controls the rate of interest and banks are offering loans on lowered interest since they have huge amount of unused fund. Government is lowering the interest on the long term loans so as to encourage the GDP that is mainly appealing to the corporate or industrial sector. They can speed up their production with the added power of long term loan during the recession and try to improvise the demand of their products. The manufacturers are many times compelled to lower their prices than the regular so that people can find it easier to purchase.

States economic recession is a decrease in the economy of the country. People hold their purchasing power and economies in their lifestyle. They try to hold money as far as possible since they understand the value of money. Saved money is the only alternate can help you to survive during the rainy days. The effect of the state recession is largely observed everywhere in life and it affects drastically on the business. The sales go down remarkably in shops and companies. Since people are holding money, they refrain to pay the outstanding with an excuse of recession. Many companies prefer to lay off people due to lack of business and that makes people decrease spending even more. A period of recession is a shallow and shorter span then depression and most people are not aware about the future. The job market is always affected badly during the recession as most people are being retrenched due to lack of business. Many big and known companies prefer to go bankrupt as they declare their inability to continue the business anymore due to lack of income. The industrial production is also weakened sharply due to lack of demand. Recession is largely due to holding of purchasing power. When people observe insecurity in life, the first thing they put a big cut on their routine lifestyle and try to economies at every step of life to save the maximum and survive. The life becomes difficult without the source of income. When the entire market is disrupted, the effects are clearly visible. Unemployment is the greatest fear of any working individual and that puts the question mark on their living. Retrenchments of the jobs are another dangerous effect of the recession worldwide. Many developed countries offering big opportunities of outsourcing people from overseas are now tend to reduce staff and put a great elimination on employing people anymore. The small and medium sized companies find it very difficult to survive and as a consequence, they are bound to shut down their commercial activities. People observe big cuts in their routine budgets; the priorities are changing when job seekers are deserted. It is a general observation that female workers are most affected worldwide due to the recession state as most of them are not involved into any productive jobs which could make them indispensible.

When there is a decline in the global growth up to three percent then it is referred as a global recession. The estimation of the global recession is done by the International Monetary Fund. The economic recession history of the world shows that there is a global recession in the gap of normally eight to ten years. The economists at the International Monetary Fund state that if there is a deceleration in the global growth up to three percent or even less than that, then it should be deemed as global recession. According to the history of recessions maintained by the International Monetary Fund, the recessions during the last thirty years showed a negative or zero output growth in the international per capita income. After the great Depression in 1985, three more periods could be referred to be global recession in the recession’s history i.e. recession of 1990 to 1993, 1998 recession and recession of 2001 to 2002.

If we want to know why we are in a recession, then first of all we have to understand its meaning and why does recession occurs. The downward turn in the industrial movement of any nation that lasts for more than a few months is commonly tagged as the Recession. There are various aspects which would edify you with why do recessions arise. These aspects or causes are defined by John Maynard Keynes.