Skip to main content

A breif on Recession (intro)

The drop in the growth rates of the economy, usually due to fall in productivity, is general view of recession. In other words, the growth is 'receding.' Recession is much more benign than depression. Depression means actual shrinking of the economy.
Some of the triggers for recession are fall in the money supply, rise in interest rates, fall in the consumption demand, supply-side problems/glut, drop in business confidence, falling/negative investment-growth in economy, rising inflation, falling corporate growth to name few triggers/symptoms. Like everything in the system, every factor in turns affects others.
It is very difficult for all/many of these factors to align and give a perfect recession ‘onset’ signal. Therefore the representation of recession is the decline in growth rates for two consecutive quarters. The 'onset' of recession does not imply 'dark-days ahead', because underlying engines of growth could be still functioning fine. With a little tweak here and there (read interest rates, policies and taxes) the engine could push the economic growth to a higher/former trajectory. Unfortunately, the boosts from these tweaks do not last long, and its effectiveness fades with prolonged use. A normalization, reversion to mean, correction - call it what you like is essential to flush out the excesses in the system.
You cannot have a perpetual growth engine. When it takes a break, that’s recession.
Labels:

Comments

Post a Comment

Popular posts from this blog

Cognitive rules of business presentations

In his recent book, Clear and to the Point, Kosslyn explained that the four rules of PowerPoint are: The Goldilocks Rule, The Rudolph Rule, The Rule of Four, and the Birds of a Feather Rule. Here's how they work. The Goldilocks Rule refers to presenting the "just right" amount of data. Never include more information than your audience needs in a visual image. As an example, Kosslyn showed two graphs of real estate prices over time. One included ten different numbers, one for each year. The other included two numbers: a peak price, and the current price. For the purposes of a presentation about today's prices relative to peak price, those numbers were the only ones necessary. The Rudolph Rule refers to simple ways you can make information stand out and guide your audience to important details -- the way Rudolph the reindeer's red nose stood out from the other reindeers' and led them. If you're presenting a piece of relevant data in a list, why not mak...
Post a Comment
Read more

Monetary inflation, Spiritual devaluation

Its been sometime I have been trying to make some special people understand the evils of inflation. Inflation is an abstract subject most of us dont know about, let alone understand the technicalities amidst jargons. I have in my previous post have briefly touched the social part of inflation but never in a concentrated way. I understand what my friends mean when they say "tell me in layman’s language." It is not a heartening sign, that they avoid technicalities. But it could well be that knowing where they stand, their role and understanding the social changes in the light of inflation may motivate them to understand the term "inflation." This is just to highlight the brief points. First and the foremost, is there any link between inflation numbers and society. Yes. The relation is same as the relation between society and money. What is money? Money is an easy means of exchange. If I am selling my horses to a pig-farmer and I am not interested in taking pigs in ret...
2 comments
Read more

Unprecedented External Demand Shock Underway

India’s export growth averaged 24.8% over the last three years, driven by strong global growth. However, over the last three months, export growth has decelerated sharply. While until recently the strong demand from emerging markets including Latin America, Emerging Europe, the Middle East and Africa ensured that export growth remained healthy, over the last three months disruptions in the macro environment of these economies have been evident. Apart from weakening demand, exports have also been affected by the lack of availability of foreign trade credit and inventory liquidation. India’s exports declined by 12.1%Y in October 2008 compared with 10.4% in September and 26.9% in August. While we expect some improvement in the second half of 2009, exports are likely to be unusually weak over the next six months. We now expect exports to decline by 5.3%Y in 2009 compared with 12.7% in 2008 (estimated) and 23.1% in 2007 Excerpt source
Post a Comment
Read more