A recession is a decline
in economic activity
for a period of at
least half a year.
The world has seen several
recessions of varying degrees.
Every part of the human
inhabitable world has
experienced a recession
at a point of history.
Compared to the underdeveloped
and developing countries, the
developed nations usually fall
into definitive recession.
Some recessions are of long
duration like the Great
Depression, while some are
less severe economic crises.
There are many causes for a recession.
Economists around the world use different
techniques to predict the recession.
Also, there are many
indicators to establish
an economic condition
as a recession.
A recession can have long-lasting
impacts on human lives.
It can affect different
dimensions of society.
There are also many economists
who are of the opinion
that recessions are a normal
part of an economic cycle.
Something that provides
an opportunity to take
remedial measures and
bring in innovations.
A recession is a negative GDP
growth for two consecutive quarters.
Some recessions affect only some countries,
while some are more global in nature.
Early recessions in America
can be dated back to 1785.
The cause of early recessions was
mainly the lack of strong currency.
Loss of confidence in copper coins
resulted in the panic of 1789.
An embargo against Britain and France
resulted in the recession of 1807.
Post the Napoleonic wars, Europe
and the US experienced recessions.
There was a reduction
in international trade.
In the US, unregulated banking,
hard currency deficits, agrarian
land bubble, reduction of exports, etc.
caused the recession.
This period saw the
establishment of Second Bank of
United States which will
lose its charter in 1836.
Till 1863 there was no central
banking system in the US.
That led to several banking panics.
The circumvention of the Bank Charter
Act created panic in the UK in 1857.
The fall of several railroad companies
and banks led to a recession in the US.
A depression that affected
many parts of the world
before the Great Depression
is the Long Depression.
Demonetization of silver thaler
coins by Germany and Coinage
Act in the US resulted in
the price fall of silver.
With a shortage of gold, there was
a decrease in monetary reserves.
Reduced lending and high-interest rates
put many railroad companies under loss.
This period also witnessed the crash
of NYSE, Vienna Stock Exchange,
Paris Bourse stock market.
The long depression ended in 1896.
Change from a wartime
economy to a peacetime
economy caused mild
recession post World War1.
Then the world went through the
Great Depression starting from 1929.
This double dip depression lasted till 1938
with intermittent periods of expansion.
The major event in this depression
is the Wall Street Crash of 1929.
Dow Jones closed at 89% loss in 1932.
Businesses lost the money invested in
the stock market and went bankrupt.
Debt defaults led to the
closure of several banks.
Conservative lending that followed
further declined the economy.
Unemployment reached a record high.
The Tariff Act resulted in a
decrease in international trade.
Heavy industries in Britain were hit hard.
Germany also was affected.
Latin American countries that depend on
the exports to the US were widely impacted.
The increase in government spending
by the New Deal brought into
effect by President Roosevelt
boosted economy to some extent.
The real boost was the Second World War
which created thousands of military jobs.
The first major recession after World
War II was the 1973-75 recession.
The main reasons for that
were the oil embargo imposed
by the OPEC countries
and dollar devaluation.
This period saw stagflation.
The 1981-82 recession
was also related to the
increase in oil prices
due to the Iraq-Iran war.
The 1990s was that of growth to America.
But Japan’s economy started to decline.
The period from 1991-2010 is
called a Lost Score in Japan.
The appreciation of Yen led to
the Endaka recession in 1985.
Monetary easing was adopted
to curb the appreciation.
Real estate was booming so much in
Japan's cities that the commercial land
price increased by 122% in Tokyo in
1986 compared to the previous year.
To curb the general inflation,
interest rates were cut.
That led to the stock market crash
and the bursting of the asset bubble.
Banks were in crisis.
With their home and land prices fallen,
people became conservative spenders.
Long term deflation, a decline
in GDP and low wages followed.
The economy remained stagnant.
There were some short-lived stock
market crashes in the early 2000s.
These were the result of dot com
bubble bursts and 9/11 attacks.
The next global recession
called as the Great Recession
started in 2007 end and
continued till mid-2009.
The main factor that led to this was
subprime mortgage lending by the US banks.
An increasing number of mortgages
were delinquent or in foreclosing.
The global financial institutions that
purchased the Mortgage Backed Securities
faced huge loss and limited their
lending capacity all over the world.
This combined with the
debt defaults resulted in
the fall of banking giants
like Lehmann Brothers.
Many investment banks were
bailed out by the government.
Unemployment reached the maximum in
US and UK after the World War II.
The country that got
affected the worst is Greece.
Started in 2009, it is
still under the debt crisis.
The Eurozone entry and the
resulting monetary inflexibility
undermined the competitive
edges that it had before.
Trade deficit resulted.
The underreporting of the
previous debts resulted
in social exclusion and a
further limit in lending.
Receiving bailouts multiple times from
IMF and austerity measures that put
the civilians under difficulties
didn't help them to pay off the debts.
Recessions have long-lasting impacts.
It can bring economic, social
and political changes to society.
