- RECESSION
Attributes of a recession
Attributes of recession may be define actually decline process of the management or economics activity like employees investment and economics profits, so great depression in the market. DDP growth level 10% down in the market.
Predictors of recession
predictors of recession to find that U.S economy 10% down in 1946 economy expert says that 50% down sensax of the time of recession
inverted yield curve the model developed by economist Jonathan wright uses yield 10 year three month trasurey securites as wellas FED's over night fund's rate.
Responding to a recession
Strategics for moving on economy out of recession very depending on which economy school the policy makers follow. economy suggest tax cuts to promote business capital investment economy may suggest the benefits for consumer, in the form of subsides of lower bracket tax reduction and more effective and serve a double purpose including the case of recession. He goes on the suggest , they use learn principles replace unhappy workers , more motivased egar and highly competitive . Companies "he says " get better at what they during bad times.
Stocks market and recession
some recession have been anticepated by stock market decline . Since 1948 recession were produced by a stock market decline by a 0-13 months (average 5.7 months)
It should be noted ten stock market declines of greater than 10% in the DJIA (resarch by NBER)
During economics declines ,high yield stock such as financial service, pharmaceutical and tend to hold up better.
thus if the 2008 recession is an average one,the down trum in the stock should bottom around nov. 2008, like India sensax have been 21000 in march but today sensex is going down (9328) date 29-12-2008,60% down app.
Recession and politics
It is generally assumed that government activity has some influence over the presence or degree of a recession. Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood. Consequently, modern government administrations attempt to take steps, also not agreed upon, to soften a recession. They are often unsuccessful, at least at preventing a recession, and it is difficult to establish whether they actually made it less severe or longer lasting.
Understanding of the word "recession" differs between economists, newspapers, and the general public. Generally speaking, a recession is present when graphs are sloping down in respect to production and employment. Consequently, a politician can truthfully say "the recession is over," even though little has improved. This may imply to the public that the economy is in recovery, suggesting the graphs are sloping upward, though there may actually exist a period of stagnation, when numbers remain low even though they are no longer dropping.
History of Recession
global recession
IMF regards period when global growth is lees than 3% to be global recession because of the international monetrey fund of all word help the country in the recession time . IMF new community system applying name of G20 ( means twenty nation evolve in this community) Japan,India,U.S, U.K,Japan,china etc.
Economists at the International Monetary Fund (IMF) state that a global recession would take a slowdown in global growth to three percent or less. By this measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002.
United state recession
According to economists, since 1854, the U.S.A. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion.However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more, and three periods considered recessions:
- January-July 1980 and July 1981-November 1982: 2 years total
- July 1990-March 1991: 8 months
- November 2001-November 2002: 12 months
From 1991 to 2000, the U.S. experienced 37 quarters of economic expansion, the longest period of expansion on record.
For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. However the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.
United States
The United States housing market correction (a consequence of United States housing bubble) and subprime mortgage crisis had significantly contributed to anticipation of a possible recession.
U.S. employers shed 63,000 jobs in February 2008, the most in five years. Former Federal Reserve chairman Alan Greenspan said on April 6, 2008 that "There is more than a 50 percent chance the United States could go into recession." On October 1st, the Bureau of Economic Analysis reported that an additional 156,000 jobs had been lost in September. On April 29, 2008, nine US states were declared by Moody’s to be in a recession.
Although the US Economy grew in the first quarter by 1%, by June 2008 some analysts stated that due to a protracted credit crisis and "rampant inflation in commodities such as oil, food and steel", the country was nonetheless in a recession. The third quarter of 2008 brought on a GDP retraction of .3% the biggest decline since 2001. The 6.4% decline in spending during Q3 on non-durable goods, like clothing and food, was the largest since 1950.
A Nov 17, 2008 report from the Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters, suggested that the recession started in April 2008 and will last 14 months They project real GDP declining at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009. These forecasts represent significant downward revisions from the forecasts of three months ago.
U.K state Recession
This is a list of (recent) recessions (and depressions) that have affected the economy of the United_Kingdom.
| Name | Dates  | Duration | GDP reduction | Causes | other data |
|---|---|---|---|---|---|
| 1919-21 depression | 1919-1921 | ~3 years | 10.9% 1919 6.0% 1920 8.1% 1921 | The First World War | |
| Great Depression | 1930-1931 | ~2years | 0.7% 1930 5.1% 1931 | US Depression. Reducing demand for UK exports, also high interest rate defending the gold standard. | UK came off gold standard Sept 1931. |
| Mid 1970s recession | 1973-75 | 2 years (8 Qtr) | 3.9% | 1973 oil crisis | |
| Early 1980s recession | 1980-82 | ~2 years | 6.1% | Cause - possibly government policies? | Company earnings decline 35%. Unemployment rises 6.6% from 5.3% in Aug 1979 to 11.9% in 1984 |
| Early 1990s recession | 1990-92 | ~2 years | 2.5% | US savings and loan crisis leading to the Early 1990s recession. | Company earnings decline 25%. Peak budget deficit ~8% of GDP. Unemployment rises 3.8% from 6.9% in 1990 to 10.7% in 1993 |
| Late 2000s recession | 2008-? | ? years | >0.5% | Credit crunch or Financial crisis of 2007-2008 | -y |
Cases of recession
- currency crisis Which is also called a balance of payments crisis, it is given currency like U.S (doller) U.k (ponds), India (rupee) .
The 'first generation' of models of currency crises starts with the paper of Krugman (1979). Krugman argues that a sudden speculative attack on a fixed exchange rate, even though it appears to be an irrational change in expectations, can result from rational behavior by investors who correctly foresee that a government is running an excessive deficit. The deficit causes the government to run out of funds to back its currency at the fixed rate; investors are willing to continue holding the currency as long as they expect the exchange rate to remain fixed, but they flee the currency en masse when they anticipate that the peg is about to end.
The 'second generation' of models of currency crises starts with the paper of Obstfeld and Rogoff (1986).In these models, doubts about whether the government is willing to maintain its exchange rate peg lead to multiple equilibria, suggesting that self-fulfilling prophecies may be possible, in which the reason investors attack the currency is that they expect other investors to attack the currency.
- Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply (monetary inflation); however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflation - War is the reciprocal and violent application of force between hostile political entities aimed at bringing about a desired political end-state via armed conflict. In his seminal work, On War, Carl Von Clausewitz calls war the "continuation of political intercourse, carried on with other means." War is an interaction in which two or more militaries have a “struggle of wills”. When qualified as a civil war, it is a dispute inherent to a given society, and its nature is in the conflict over modes of governance rather than sovereignty. War is not considered to be the same as mere occupation, murder or genocide because of the reciprical nature of the violent struggle, and the organized nature of the units involved.
- Inflationary expectations. Most economies generally exhibit inflation, meaning a given amount of money buys fewer goods in the future than it will now. The borrower needs to compensate the lender for this.
- Alternative investments. The lender has a choice between using his money in different investments. If she chooses one, she forgoes the returns from all the others. Different investments effectively compete for funds.
- Risks of investment. There is always a risk that the borrower will go bankrupt, abscond, or otherwise default on the loan. This means that a lender generally charges a risk premium to ensure that, across his investments, he is compensated for those that fail.
- Liquidity preference. People prefer to have their resources available in a form that can immediately be exchanged, rather than a form that takes time or money to realise.
- Taxes. Because some of the gains from interest may be subject to taxes, the lender may insist on a higher rate to make up for this loss.
Effects of recession
Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the bankrupt individual or organization).
Defilation
To fully understand disinflation we need to first understand inflation. The word inflation originally meant an increase in the the supply of money which resulted in an increase in prices. But, in more recent years, the word inflation has come to mean the result rather than the cause. i.e. an increase in prices rather than an increase in the supply of money. This might be partially the result of the wide spread usage of the term "inflation rate" which measures the rate of price increases rather than the increase in the money supply.
A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles.
Stock market crashes are in fact social phenomena where external economic events combine with crowd behavior and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. Generally speaking, crashes usually occur under the following conditions[citation needed]: a prolonged period of rising stock prices and excessive economic optimism, a market where Price to Earnings ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants.
There is no numerically specific definition of a crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of several days. Crashes are often distinguished from bear markets by panic selling and abrupt, dramatic price declines. Bear markets are periods of declining stock market prices that are measured in months or years. While crashes are often associated with bear markets, they do not necessarily go hand in hand. The crash of 1987 for example did not lead to a bear market. Likewise, the Japanese Nikkei bear market of the 1990s occurred over several years without any notable crashes.
Frictional unemployment
Frictional unemployment occurs when a worker moves from one job to another. While he searches for a job he is experiencing frictional unemployment. This applies for fresh graduates looking for employment as well. This is a productive part of the economy, increasing both the worker's long term welfare and economic efficiency. It is a result of imperfect information in the labour market, because if job seekers knew that they would be employed for a particular job vacancy, almost no time would be lost in getting a new job, eliminating this form of unemployment.
Classical unemployment
Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level. This is often ascribed to government intervention, as with the minimum wage, or labour unions. Some, such as Murray Rothbard,[5] suggest that even social taboos can prevent wages from falling to the market clearing level.
[Structural unemployment
Structural unemployment is caused by a mismatch between jobs offered by employers and potential workers. This may pertain to geographical location, skills, and many other factors.
If such a mismatch exists, frictional unemployment is likely to be more significant as well. Seasonal unemployment occurs when an occupation is not in demand at certain seasons. for example the computer revolution drastically changed the skills required for many jobs thus . structure unemployment exit untill worker obtain needed skills and move to the places where jobs are available>>
[ Cyclical or Keynesian unemployment
Cyclical or Keynesian unemployment, also known as demand deficient unemployment, occurs when there is not enough aggregate demand in the economy. This is caused by a business cycle recession, and wages not falling to meet the equilibrium rate.
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