-RECESSION-
-Introduction-
According to the National Bureau of Economic Research (NBER), recession is defined as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales". More specifically, recession is defined as when businesses cease to expand, the GDP diminishes for two consecutive quarters, the rate of unemployment rises and housing prices decline. A recession generally lasts from six to 18 months, and interest rates usually fall in during these months to stimulate the economy by offering cheap rates at which to borrow money.
Cause-
Many factors contribute to an economy's fall into a recession, but the major cause is inflation. Inflation refers to a general rise in the prices of goods and services over a period of time. The higher the rate of inflation, the smaller the percentage of goods and services that can be purchased with the same amount of money. Inflation can happen for reasons as varied as increased production costs, higher energy costs and national debt. In an inflationary environment, people tend to cut out leisure spending, reduce overall spending and begin to save more. But as individuals and businesses curtail expenditures in an effort to trim costs, this causes GDP to decline. Unemployment rates rise because companies lay off workers to cut costs. It is these combined factors that cause the economy to fall into a recession.
Present recession-
The global recession of 2008-2009 brought a great amount of attention to the risky investment strategies used by many large financial institutions, along with the truly global nature of the financial system. As a result of such a wide-spread global recession, the economies of virtually all the world's developed and developing nations suffered extreme set-backs and numerous government policies were implemented to help prevent a similar future financial crisis.
It all started from the USA sub-prime crisis (housing financing crisis) which destroyed their financial SYSTEM and many banks and financial institutions went bankrupt. The industrial sector did not get the required finance from the banks, which affected their production n many industrial units started retrenchment of their employees. The USA economy suffered recession due to fall in production, employment and loss of purchasing power of the people.
These are the signs of recession. The USA is the richest economy of the world. Both developing n developed countries of the world depend on it for business n financial assistance. As the USA economy was in recession, it could not do the kind of business with other countries, as it used to have before recession. This affected global trade. The USA made huge investments in other countries of the world. To meet their domestic demand, they started withdrawing money from other global markets and stopped committed expenditure in other countries of the world. These two steps adversely affected global economy. The industrial units of other countries, cut production and started retrenchment of employees.The purchasing power of the people, started falling. These were the signs of recession. The solution lies in enhancing the purchasing power of the people, through increased spending by the Govt., reducing bank interest rates to make available cheap loan and easy money to the industrial sector to reduce their cost of production and to continue with their expansion and modernisation, which was stopped due to want of finance.
Solution to Recession is Not Throwing People from Their Jobs –
Rather, it is cowardice.
Try to reason out as to who are the culprits of the world wide slow down/recession? The answer is: the decisions and actions of the people at the helm of the affairs of all kinds of organizations, companies, institutions and governments. The answer is: the greed, profiteering, irresponsible behavior towards the customers, abnormally (forced) high prices of lands/construction/buildings/houses/education/health care/all kinds of products, artificially jacked up stock prices, corruption/scams/frauds etc. It is the top management everywhere of every organization (including governments), that is the real culprit.
As an extreme statement, any Tom, Dick and Harry can run the organizations in good times. It is during bad times, they need to really run the organizations. It is then that their mettle can be tested.
Running the organization in such bad times does not mean chucking out people of the organization as the first and the easiest of all the solutions. And yet, how many organizations throw out their top management guys? Perhaps none.The business sense will tell any fool that we need people to buy things. If you throw out a large numbers of people from their jobs, the purchasing power dips further which is one major cause of recession or slow down. Apart from that, you are putting millions of people and their families under the traumatic experiences without jobs. Families after families get uprooted when you throw them out of jobs during recession or slow down and many people have committed suicide due to the trauma of job loss and loss of earnings for the family.
Better solution will be to reduce the salaries of every one in the organizations and not lay off any one. More salary cuts should be for the top guys of various organizations (including the ones in the governments) since their salaries are abnormally high in general and they are the ones who made horrendous mistakes and drove everyone to this disaster called recession. There have been numerous instances when despite recession and despite employees being laid off, the company top bosses distributed huge bonuses to themselves. And then, these same top bosses go to the governments (in other words, the same public whom they are chucking out from their jobs) with the begging bowls for the bail-out money. More steep salary cuts of the top brass of the companies and moderate/reasonable salary cuts of other employees will bring down the salary costs of the organizations dramatically.
Then having achieved this, motivate all the people in the organizations to apply their minds towards further cost cutting. As a result, organizations will be in position to reduce the prices of land, construction, buildings, houses, education, health care and all kinds of products. As the prices become reasonably low and realistic and within the reach of people, they will start buying the things and investing in things. The whole resurrection will be absolutely painless.
Also, devise and implement stricter controls over the governance of the organizations (including those of external auditors and justice departments) so that the scams/frauds/corruption are brought down to minimum and ultimately eliminated.
According to the National Bureau of Economic Research (NBER), recession is defined as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales". More specifically, recession is defined as when businesses cease to expand, the GDP diminishes for two consecutive quarters, the rate of unemployment rises and housing prices decline. A recession generally lasts from six to 18 months, and interest rates usually fall in during these months to stimulate the economy by offering cheap rates at which to borrow money.
Cause-
Many factors contribute to an economy's fall into a recession, but the major cause is inflation. Inflation refers to a general rise in the prices of goods and services over a period of time. The higher the rate of inflation, the smaller the percentage of goods and services that can be purchased with the same amount of money. Inflation can happen for reasons as varied as increased production costs, higher energy costs and national debt. In an inflationary environment, people tend to cut out leisure spending, reduce overall spending and begin to save more. But as individuals and businesses curtail expenditures in an effort to trim costs, this causes GDP to decline. Unemployment rates rise because companies lay off workers to cut costs. It is these combined factors that cause the economy to fall into a recession.
Present recession-
The global recession of 2008-2009 brought a great amount of attention to the risky investment strategies used by many large financial institutions, along with the truly global nature of the financial system. As a result of such a wide-spread global recession, the economies of virtually all the world's developed and developing nations suffered extreme set-backs and numerous government policies were implemented to help prevent a similar future financial crisis.
It all started from the USA sub-prime crisis (housing financing crisis) which destroyed their financial SYSTEM and many banks and financial institutions went bankrupt. The industrial sector did not get the required finance from the banks, which affected their production n many industrial units started retrenchment of their employees. The USA economy suffered recession due to fall in production, employment and loss of purchasing power of the people.
These are the signs of recession. The USA is the richest economy of the world. Both developing n developed countries of the world depend on it for business n financial assistance. As the USA economy was in recession, it could not do the kind of business with other countries, as it used to have before recession. This affected global trade. The USA made huge investments in other countries of the world. To meet their domestic demand, they started withdrawing money from other global markets and stopped committed expenditure in other countries of the world. These two steps adversely affected global economy. The industrial units of other countries, cut production and started retrenchment of employees.The purchasing power of the people, started falling. These were the signs of recession. The solution lies in enhancing the purchasing power of the people, through increased spending by the Govt., reducing bank interest rates to make available cheap loan and easy money to the industrial sector to reduce their cost of production and to continue with their expansion and modernisation, which was stopped due to want of finance.
Solution to Recession is Not Throwing People from Their Jobs –
Rather, it is cowardice.
Try to reason out as to who are the culprits of the world wide slow down/recession? The answer is: the decisions and actions of the people at the helm of the affairs of all kinds of organizations, companies, institutions and governments. The answer is: the greed, profiteering, irresponsible behavior towards the customers, abnormally (forced) high prices of lands/construction/buildings/houses/education/health care/all kinds of products, artificially jacked up stock prices, corruption/scams/frauds etc. It is the top management everywhere of every organization (including governments), that is the real culprit.
As an extreme statement, any Tom, Dick and Harry can run the organizations in good times. It is during bad times, they need to really run the organizations. It is then that their mettle can be tested.
Running the organization in such bad times does not mean chucking out people of the organization as the first and the easiest of all the solutions. And yet, how many organizations throw out their top management guys? Perhaps none.The business sense will tell any fool that we need people to buy things. If you throw out a large numbers of people from their jobs, the purchasing power dips further which is one major cause of recession or slow down. Apart from that, you are putting millions of people and their families under the traumatic experiences without jobs. Families after families get uprooted when you throw them out of jobs during recession or slow down and many people have committed suicide due to the trauma of job loss and loss of earnings for the family.
Better solution will be to reduce the salaries of every one in the organizations and not lay off any one. More salary cuts should be for the top guys of various organizations (including the ones in the governments) since their salaries are abnormally high in general and they are the ones who made horrendous mistakes and drove everyone to this disaster called recession. There have been numerous instances when despite recession and despite employees being laid off, the company top bosses distributed huge bonuses to themselves. And then, these same top bosses go to the governments (in other words, the same public whom they are chucking out from their jobs) with the begging bowls for the bail-out money. More steep salary cuts of the top brass of the companies and moderate/reasonable salary cuts of other employees will bring down the salary costs of the organizations dramatically.
Then having achieved this, motivate all the people in the organizations to apply their minds towards further cost cutting. As a result, organizations will be in position to reduce the prices of land, construction, buildings, houses, education, health care and all kinds of products. As the prices become reasonably low and realistic and within the reach of people, they will start buying the things and investing in things. The whole resurrection will be absolutely painless.
Also, devise and implement stricter controls over the governance of the organizations (including those of external auditors and justice departments) so that the scams/frauds/corruption are brought down to minimum and ultimately eliminated.
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