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

Value of dollar - Part 1

A Simple Perspective Will Do The date is 2000-05-28. Don't you get tired of all the bad news bears reminding you of all these instabilities, excesses, and 'potential' tensions in the global economy? After all, hasn't it always been like that? Yes it has, but not in money it hasn't. Increasingly, investors find it harder to know where to put their savings. What about Government Bonds? Wrong. Their recent record of capital losses have wiped out your guaranteed yields, probably because the stock market keeps crowding them out, and this even in a strong dollar and low inflation environment. Furthermore, there is no reliable liquidity and potentially poor quality debt in the corporate sector. Foreign assets? Wrong. Most of the world's economies are riskier, have been under performing, and also, there is this thing called currency risk. Like how is the average person gonna cope with currency...
Post a Comment
Read more

Depreciation of British Pound 1900-2000

When the Bank of England was formed the powers to create money was finally transferred to private hands. The creation of Fed in US, was just a part of this cycle. Though it is a common knowledge US Dollar has depreciated nearly 100% since the creation of Federal Reserve, the same is the case of all the currencies across the globe. For example, below is the UK Parliament data that highlights the depreciating value of Pound.
2 comments
Read more