Economic Recession
According to economics, long-term economic inactivity or slowing of commercial rotation is
called recession. During the recession, the big economic indicators hold same value. During
the recession, the National Average Income (Gross Domestic Product or GDP), Jobs,
Investment Expenses, the use of production capacity, family income, business profit and
inflation, all of these decreases. During recession, bankruptcy and unemployment increases.
Different types of expansionary activities such as adopting macroeconomic policies,
increasing the money supply, increasing government expenditure and reducing the tax,
government try to deal with the recession.
Factors that cause Recessions
High interest rates are a cause of recession because they limit liquidity, or the amount of
money available to invest.
Another factor is increased inflation. Inflation refers to a general rise in the prices of goods
and services over a period of time. As inflation increases, the percentage of goods and
services that can be purchased with the same amount of money decreases.
Reduced consumer confidence is another factor that can cause a recession. If consumers
believe the economy is bad, they are less likely to spend money. Consumer confidence is
psychological but can have a real impact on any economy.
Reduced real wages, another factor, refers to wages that have been adjusted for inflation.
Falling real wages means that a worker's paycheck is not keeping up with inflation. The
worker might be making the same amount of money, but his purchasing power has been
reduced.
Identification of Recession
In an article published in the New York Times in 1975, Economic statistician Julius Schiskin
spoke of several basic rules for the recession. One of them is "two down quarterly episodes of
national average earnings". Over time the terms are changed and currently the recession
refers to a period when national average income is at least two quarters (Negative rate of
actual economic growth) decreases.
In the United States, the Business Cycle Dating Committee of the National Bureau of
Economic Research (NBER) is generally considered to be an expert in identifying the United
States recession. Definition of NBER is defined as: "For more than a few months, economic
activity across the country, such as, Real national income growth, real personal income, jobs
(Outside the corporate salary list), If there is significant reduction in industrial production and
wholesale retail sales, then it will be called recession. However, overall educationists,
economists, policymakers and business organizations have different views about the
scheduled start and end of the recession scheduled for the NBER.
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Feature of Recession
There are many characteristic features of the recession that may occur at the same time, such
as, Investment, business corporate profit and job opportunities decrease simultaneously.
An intense (10% decline in national average income) or chronic (three or four years)
recession is called economic depression, although many argue that its causes and solutions
are different. Economists generally talk about different sizes of short recessions, Such as V-
shaped, U-shaped, L-shaped, and W-shaped.
V-shaped recessions appeared in the United States in 1954 and 1990-91, that is, initially short
and severe contractions and then fast and long-term survival. In 1974-75, the U-shaped
recession (recession) came, and appeared in 1949 and 1980-82W-shaped or dual meaning
once again dropped again and dropped down again.
The recession that came in Japan in 1993-94 was U-shaped andBy the 1997-99, 8
contractions of 9 quarterly episodes can be called L-size. The U-shaped recession came in
Korea, Hong Kong and Southeast Asia in 1997-98, although eight quarters of the decline
after Tiemale can be called L-shaped. [9]
Recession index
Although there is no completely reliable index for the recession, the following factors can be
considered as potential indicators.
In the US, there has been a significant downturn in the stock market. But after the fall
of 10% or more since 1946 in almost half the recession did not come. After the
recession began in 50%, there was a significant drop in the stock market.
10 years - 3 months Treasury protection and the Fed Economist Jonathan H. Wright,
on the basis of production estimates on the rate of overnight fund, Inverted yield
curve model was created. In another model created by the Federal Reserve Bank of
New York's economists, the expansion of the period of 10 years / three months has
been used. This is not a sure indicator; sometimes the recession may occur after 6 to
18 months.
Three-month change in primary joblessness and unemployment rate.
List of pioneer (economic) indicators (some of the above mentioned indicators)
Reduced home prices. Lower house prices or lower prices, additional personal loans.
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Recession and GDP
A recession occurs when there are two or more consecutive quarters of negative gross
domestic product (GDP) growth. In other words, economic growth slows during a recession.
Attributes of an economy experiencing a period of recession include a fall in sales and
revenues of corporations, a fall in stock prices, falling incomes. Recession effects can
snowball and worsen the recession. When there are massive layoffs and no jobs being
created, consumers tend to save money, tightening the money supply. When there is a
tightened money supply, unemployed workers and workers with low wages tend to save more
and spend less, decreasing the demand for goods and services and decreasing consumer
spending. This drop in demand lowers the growth rate of companies and the economy, and
thereby affecting GDP.
Recession and Employment
When an economy is facing recession, business sales and revenues decrease, which cause
businesses to stop expanding. When demand is not high enough, businesses start to report
losses and first try to reduce their costs by lowering wages, keeping wages where they are
and ceasing to hire new workers, which increases the unemployment rate.
Recession and Globalization
In the era of globalization, the economic recession of any country will fall on other countries,
it is normal. Bangladesh's connection with the global economy in many ways, from import-
export to financial sector, has increased much earlier. The outline of the current global
economic recession is slightly different compared to the last eight years.
The recession of that time was based on the United States. This is mainly Chinese, which is
prevailing in Asian countries. So the impact of this is going to be the risk of more economic
disaster than ever before. In particular, there will be negative tendency towards remittance,
export earnings, revenue income and default money, which will affect the whole economy.
Recession and Import
The prices of international products have fallen drastically. The most fueled fuel oil price The
price of oil that went up to $ 159 is now sold at $ 34 per barrel. 25 percent of the total import
of Bangladesh is fuel oil. The prices of other products also declined. Due to lowering the
price, the import cost will be reduced, it is normal. But it did not decrease but rather
increased. In July-December of the last fiscal year, the import cost increased 4.7 percent.
During the current fiscal year, it increased to about 7 percent. Meanwhile, due to the
recession, investment is less. Decreased industrial equipment, fuel oil and food items import
10 percent of the industry's growth has decreased. However, the import of raw materials of
the industry has increased. Whereas the investment is not taking place. The demand for
banking sector is low. In this situation, according to economists, we should see where raw
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materials are being used. They said, now the money is being smuggled from the country in
the name of import. A group is now safely transferring money from the country in a number
of ways that the foreign currency reserve is in comfort.
Recession and Export
In the sectors other than ready-made garments, the recession continues to grow. However,
there are various types of threats in the US and Europe market. If the recession in Europe and
America is long lasting, the export of clothing exports may be reduced. As a result, there are
doubts about the continuity of export earnings. Already in the foreign market, the prices of
Bangladeshi products have come down. As a result, now the income is not increased by
exporting more than ever.
Government Initiatives
Most mainstream economists believe that recessions arise due to insufficient average demand
in the economy and they favor the expansionary macroeconomic policy during recession.
There are various strategies for reducing any economy from recession. Strategies vary
depending on policy makers following which branch of economics. In the process of making
changes in the economy by controlling the supply, the believers favor the use of expansionary
monetary policy. Again, the economists who followed Keane's told to increase the
government's expenditure to accelerate the growth of the economy. Policymakers believe that
economists do not want government intervention on the normal working conditions of the
market.
Stock Market and Recession
Some recessions were predicted from the fall of the stock market. In Stocks for the Long
Run, Segel says that in the first 10 months of the period from 0 to 13 months (average 5.7
months) since 1948, the stock market index had fallen. However, the recession did not occur
after ten points in the stock market index falling more than 10% on DJIA. Before the
recession, the real estate market also becomes weak. [18] However, the decline in real estate
may last for a long time.
As it is very difficult to predict the trade cycle will rotate, Segel said, it is not possible to take
advantage of economic cycle to find the right time for investment. Even the National Bureau
of Economic Research (NBER) took months to say specifically whether economy tops in the
United States have dropped to a ditch.
During the fall of the economy, high yielding commodities, pharmaceuticals and tobacco
products, etc., can survive better. But when the economy starts to return to normalcy and the
bottom line of the market is cut (this condition is sometimes referred to as the MACD), Then,
the development of the product of fast growing products is rapidly improving. There are
significant disagreements about how healthcare and essential products return to normalcy.
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Sharing portfolios into multiple international shares can have some security potential; but the
economies that are closely related to the US economy may also be affected when there is
recession in the United States.
In this context a reference to half the rule (halfway rule) is mentioned. According to this, in
the middle of the recession the investors started taking advantage of the situation in the
normal state of the economy.
Since the year 1919, the average length of 16 US recessions was 13 months, although recent
recessions were much lower. So if the recession of 2008 has followed the average rule, then
the downturn in the stock market has come down to the bottom of the month of November
2008.
Recession and politics
Usually for the economic situation, the country's immediate administration is to be praised or
to be part of the blame. This led to disagreements about when a recession started. If an
economic expansion reaches a level where it is no longer possible to survive, If so, the result
is the downfall of the economic cycle, and the situation is revised by a brief fall. So it is not
very easy to separate the specific causes of this whorl.
Ronald Reagan is responsible for the recession that occurred in 1981 before taking
responsibility. Federal Reserve Board Chairman Paul Voller's Currency-Contraction Policy
(Tight Money Policy). Reagan supported this principle. Economist Walter Holler, chairman
of the Council of Economic Advisers in the 1960s, said, "I will call this recession the
Reagan-Volker-Carter recession.
However, due to the contraction of this inflation, however, the path of strong economic
development was expanded during regeneration.
It is generally believed that the government's activities have some impact on the template:
weasel-inline, recession and its intensity. Economists also said that generally the recession is
not completely avoided and its causes are not well understood. As a result, the modern
government and administration take some measures to ease the recession, but there are
disagreements with them. In most cases, these steps fail at least to prevent recession, and it is
also difficult to determine whether the recession has been less severe or prolonged due to
these actions.
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The history of Recessions
Global recession
There is no commonly accepted definition of global recession. According to the IMF, when
the world's development is less than 3%, then the situation is called global recession.
According to the IMF estimates, global recession will occur in each cycle of 8 to 10 years.
For the last three decades, the IMF has called global recession as a worldwide recession, in
which the rate of increase in per capita production worldwide was zero or negative.
Economists of the International Monetary Fund (IMF) say global recession rate will be three
percent or less due to global recession. According to this standard, four deadlines has been
identified since 1985: 1990-1993, 1998, 2001-2002 and 2008-2009.
The United States Recession
According to economists, starting from 1854, the United States has developed a total of 17
months of contraction and 38 months of expansion. 32 expand and contraction cycles have
been implemented. [8] However, only one in eight or more [31] financial quarterly periods
since 1980 Negative economic development has been observed, and four periods are
considered as recessions:
July 1981 to November 1982: 14 months
July 1990 to March 1991: 8 months
From March 2001 to November 2001: 8 months
From December 2007 to present: Present
After the NBER's decision in the last three recessions, two quarterly cases have been roughly
the same as the definition of financial collapse. Although there is no quarterly decline in the
recession of 2001, there is a gradual decline in the rate of decline and decrease in frequency
before the recession.
The recession of the late 2000s
According to the official data received from the government sources, many countries fall into
recession in early 2009. In the fall of 2007, there was a recession in the United States, and
many more countries followed in 2008.
United States
The United States housing market amendment (a possible outcome of housing bubble in the
United States) and subprime mortgage crisis had a significant impact on the recession
situation.
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In the last 20 years during the recession of 2008-2009, the amount of personal expenditure for
the first time has happened. From this, the intensity and depth of recent recessions are
estimated. Consumers' confidence will take a long time to return to normalcy from this
recession.US consumers have been severely damaged due to recent recessions, their home
prices have decreased and their pension savings in the stock market have also been damaged.
Consumers do not just see themselves losing their resources - because of the increase in
unemployment; they are now also facing the fear of joblessness.
In February of 2008, US employers have cut 63,000 jobs from jobs [35], the highest in the
last five years. On April 6, 2008, Alan Greenspan, former chairman of the Federal Reserve,
said, "There is a possibility of recession in the US more than 50 percent. On October 1, the
Bureau of Economic Analysis reported that more than 156,000 jobs were cut in September.
On April 29, 2008, Moody's announced that the nine US states were in recession. In
November 2008, employers pruned 533,000 workers, which in 34 years of history were the
highest pruning of one month. In 2008, an estimated 2.6 million people in the United States
(1 million = 100 million) jobs were pruned.
The unemployment rate in the United States rose to 8.5 percent in March 2009, and from
December 1, 2007 to December 2009, 5.1 million employees were truncated from jobs. It was
compared to just one year ago. About five million more, after the 1940s, it was the yearly
increase in the number of unemployed people.
Even though the US economy grew by about 1% in the first quarter, some analysts said that
the long-standing crisis in the loan sector and the country was "depressed" due to "extreme
inflation in consumer goods like oil, food and steel." In the third quarter of 2008, the national
average 0.5% contraction occurred in income, the highest fall since 2001 In the Third
Quarter, the amount of expenditure in microfinance was 6.4% for the long-term survival of
clothing and food, which was the highest since 1950.
Based on the data obtained from a survey of 51 forecasts by the Federal Reserve Bank of
Philadelphia on November 17, 2008, the recession began in April 2008 and it remains 14
months. They said the actual national average earnings will fall at an annual rate of 2.9% in
the fourth quarter and this rate will rise to 1.1% in the first quarter of 2009. These forecasts
speak of a significant downturn compared to the predictions made three months ago.
On December 1, 2008, a report by the National Bureau of Economic Research reported that
the United States has become depressed since December 2007 (when economic activity was
in the limelight). This report was based on certain criteria such as pruning from jobs,
declining personal income and lowering real national income. [45] By July 2009, the growing
number of economists believed that the recession might have ended. But the National Bureau
of Economic Research will officially take some more time to announce this. For example, in
the recession of 2001, the recession had ended in November 2001, but before July 2003
NBER officially did not make any announcement.
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Other countries
Other countries have seen their national average income growth rate declining. The reasons
for this are accounted for reduced financial constraints, food inflation and inflation in the US
and the recession of the United States. Among the countries of the EEA are the British United
Kingdom, Ireland, Canada, Japan, China, India, New Zealand and several other countries. In
some of these countries, experts have already announced the recession situation, and still
waiting for information on the development of national average income of the fourth quarter
to know whether the negative growth of the two quarters has been negative since then. India
and China faced slowdown in the economic sector but did not face a complete recession.
Africa and South Africa are also going through economic slowdown and global recession.
Australia has been able to avoid a technological downturn of 2009 and has developed positive
growth despite global economic downturn.
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