The Essence of Recession and Its Worth Essay

Introduction

The world of finance, as well as the economic world, is complicated indeed. Almost every event has its goal, ground, and explanation. The only factor that is absent is the possibility to develop a personal opinion regarding a personal experience because there are a number of facts, definitions, and outcomes that cannot be neglected. At the same time, people are free to discover some good aspects in many negative concepts and underline the negative points in the required positive changes. There are many discussions about recessions, their backgrounds, impact, various ways of development in different countries, etc. In this paper, the definition of a recession will be given, and the analysis of this concept will be offered to comprehend how people should understand the worth of recessions. As a rule, people consider the term ‘recession’ as a negative change in a stable economic world; however, research shows that a recession may have several positive characteristics.

Definition

According to the National Bureau of Economic Research (2010), a recession is defined as a “period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales” (par.2). The fact that a recession is a kind of economic decline makes people think that this concept has the negative outcomes only.

The process of recession is not too complicated and has its reasons and explanations. People get used to spending much money, taking debts, and meeting their demands. The government cannot allow spending such amounts of money because there is a risk of inflation. Therefore, it is necessary to raise prices and make people stop spending their money. The results usually impress because people stop spending their money and take numerous attempts to save incomes and be able to pay debts. In a short period of time (it usually takes from two to five years), the economy of a particular country where the recession takes place is recovered, the government is satisfied with its ability to control people’s financial activities, and people may continue spending money they have until they face another case of recession. It means that any recession has a repetitive nature, and it is hard to guess when it may be expected until some of its signs are discovered.

Causes

The definition and the description of a process called ‘recession’ help to realize that people cannot avoid it even if they take all necessary precautions. Still, there is a possibility to learn the main “symptoms” of a recession and try to be ready for it. In other words, it is possible to predict a soon development of a recession and make the required preparations. Kotila (2010) explains that economic recessions do not come suddenly but develop during a certain period of time. People have to analyze the current economic situation properly to understand when the next recession can take place. One of the frequent causes of a recession is joblessness. It is hard to control the economic situation of the country due to the constant changes in the job market. However, as soon as a sudden and constant rise of jobless people is observed, people should be ready to face a new recession.

At the same time, it is wrong to believe that a recession can come when the number of jobless people is increased. More causes should be identified. Professional analytics of companies may predict the possibility of recessions better than ordinary people, and they suggest their leaders to keep a number of working places open. Therefore, if companies do not want to hire new people and try to promote new retirement programs, it means their leaders want to decrease the expenses to survive a coming recession.

In addition to the job market issues, people should follow the price politics in the country. The possible signs of recessions are poor sales and profits, a fall of GDP, the inabilities to use credit cards, an impressive rise of food and other commodities prices, and significantly low costs on a property (because not many people are eager to buy it). As soon as people start noticing these changes and discuss the economic situation in the country, all these signs may prove the presence or soon coming of a recession.

Examples

One of the latest recessions that are known globally is the Great Recession that takes place after the financial crisis of 2007-2008 in the United States of America. The essence of this economic decline lies in the impossibility to control housing-related assets. At the end of 2007, the housing bubble burst (Canterbey, 2011), and a number of problems took place. Consumer spending was considerably decreased. Business investments were minor. People continued losing their jobs and could not find new opportunities. The level of uncertainty was dramatic. People did not find it necessary to make serious financial decisions, and companies lost their opportunities to earn money. In a short period of time, many companies became bankrupts because of their inabilities to take debts from banks. In their turn, banks underwent considerable changes, and some organizations had to be closed.

People lost their jobs, and the government did not want to cover the losses. Some researchers admit that President Obama tries to take many responsibilities at the same time and fails to meet the expectations (Canterbery, 2011). Fox (2009) and the team of Time underline the mistakes made by George Bush and his failure to solve the recession problems in 2001 and improve a poor financial performance. However, even if the blame of one person or several people is proved, it is incorrect to believe that other people are out of the problem.

When the recession covered the USA, a number of developed and developing countries faced similar economic and financial problems. Such countries like Britain and Germany were challenged by high unemployment rates, and China was able to resist the challenges of recessions and avoid a number of financial problems. The reports also show that Asian countries and Latin America were better prepared for financial challenges in comparison to the world giants like the USA (Canterbery, 2011).

Effects

There are many negative effects of a recession that people have to be ready for. The problems of unemployment have been already discussed and defined as a crucial point for consideration. Still, it is possible to cope with the problem and, instead of searching for a well-paid job with all working privileges, try to find a part-time job just to earn money and survive the crisis.

Despite the fact that a recession is a financial issue, a number of personal outcomes and challenges take place during this process. On the one hand, family relations undergo considerable changes and tests. Family members have to live together and support each other in case the problem of unemployment takes place. People should be ready to change their lifestyles and learn how to save money. Such problem is urgent for families with children when parents cannot explain why a new purchase has to be suspended or even cancelled. On the other hand, certain financial frames should unite a family and provide its members with a time to be together. Family members can think about their mutual interests and try to start their own business regarding their opportunities and materials. Therefore, it is possible to define a recession as a reason to think about the development of personal abilities.

Conclusion

In general, people cannot avoid recessions and have to take a number of actions to decrease the number of negative outcomes of this process. The government is not always able to control all financial and economic operations. The government-bank-customer relations become complicated during recessions. Ordinary people cannot find good jobs. Banks do not offer loans. Governments cannot solve the problems of unemployment and stabilize the economic situation. A number of discontents and high expectations deprive people of the opportunities to believe in their powers and survive the crisis. The economy becomes weak, and the business environment is unstable. People have to use the current technological achievements, exchange the information properly, and plan their activities in regards to their possibilities. Recessions should not be understood as something terrible and hard to overcome. This economic decline is only another challenge that has to be survived.

References

Canterbery, E.R. (2011). The global great recession. Hackensack, NJ: World Scientific.

Fox, J. (2009). A look back at Bush’s economic missteps.Time. Web.

Kotila, I. (2010). Survive the recession: Spiritual and practical tips to find a better financial future. Bloomington, IN: iUniverse.

The National Bureau of Economic Research. (2010).Business cycle dating committee, national bureau of economic research. Web.