What is a recession?

In economics, the term recession is generally used to describe a situation in

which a country's GDP, or gross domestic product, sustains a negative
growth factor for at least 2 consecutive quarters. I say generally because
recession can be defined differently by different economists. Just as there is
an agency to define the measure of inflation; the official agency in charge of
declaring that the economy is in a state of recession is the National Bureau of
Economic Research (NBER). NBER's definition of recession is a bit more
vague than the standard one that was described above; they define recession
as a "significant decline in economic activity lasting more than a few
months". For this reason, the official designation of recession may not come
until after we are in a recession for six months or even longer. Some
economists also suggest that a recession occurs when the natural growth
rate in GDP is less than the average of 2%. Typically, a normal economic
recession lasts for approximately 1 year.

Causes of Economic Recession

This is another staunchly debated topic; but the general consensus is that a ecession
is primarily caused by the actions taken to control the money supply in the economy.
The Federal Reserve is responsible for maintaining an ideal balance between money
supply, interest rates, and inflation. When the Fed loses balance in this equation, the
economy can spiral out of control, forcing it to correct itself. This is precisely what we
have seen in 2007, where the Feds monetary policy of injecting tremendous amounts
of money supply into the money market has kept interest rates lower while inflation
continues to rise. This, coupled with relaxed policies in lending practices making it
easy to borrow money; the economic activity became unsustainable resulting in the
economy coming to a near halt. It is also said that recession can be caused by
factors that stunt short term growth in the economy, such as spiking oil prices or
war. However, these are mostly short term in nature and tend to correct themselves
in a quicker manner than the full blown recessions that have occurred in the past.

Effects of a Recession
An economic recession can usually be spotted before it happens. There is a tendency
to see the economic landscape changing in quarters preceding the actual onset.
While the growth in GDP will still be present, it will show signs of sputtering and you
will see higher levels of unemployment, decline in housing prices, decline in the stock
market, and business expansion plans being put on hold. When the economy sees
extended periods of economic recession, the economy can be referred to as being in
an economic depression.

Unemployment, hunger and food shortages affected millions during the Great
Depression

Between the autumn of 1931 and the following spring, the casualty lists of the Great
Depression grew like those of the First World War. More that 10 million people were
unemployed but only a quarter of them were receiving any relief from the government or
charitable organizations. Approximately 30 million Americans were without any income
at all.
Two million vagrants, many of them minors, roamed the country looking for work. 20%
percent of the nation’s school children were malnourished and underweight. In the
poorest communities - among the share croppers of Alabama or the coal miners of
Pennsylvania, Kentucky and West Virginia, over 90 per cent were affected.
For those in work average wages fell from 1929 levels by a fifth, to $22.64, thought in
Tennessee mills and New York sweatshops women were paid anything from $2.39 to
$0.50 a week. Half a million Americans moved from the city to rural areas to try and
make a subsistence living off the land.
During the 1930’s, for the first time in the Republic’s history, more people left the USA
than arrived (although) this was partially affected by Hoover’s immigration laws).
Between 1929 and 1932 the birth rate fell from 18.8 to 17.4 per 1000 and the suicide rate
rose from 14 to 17.4 per 100,000.
Prices fell so low that food production was affected. In Montana thousands of acres of
wheat went uncut because they would not pay for the price of harvesting - 16 bushels
would earn enough to buy a 4 dollar pair of shoes. In Iowa a bushel of corn was worth
less than a packet of chewing gum. Apple and peaches rotted in the orchards of Oregon
and California, just as cotton did in the fields of Texas and Oklahoma.
Western ranchers killed their cattle and sheep because they could not pay to feed them.
Yet their was hunger amid abundance. Bread lines stretched under choking grain
elevators. Malnutrition and associated diseases like rickets and pellagra were
commonplace. President Hoover insisted that
“Nobody is actually starving”

Causes of recessions

• Currency crises
• Inflation
• National debt
• Speculation and economic bubbles
 • War
• Excessive interest rates
• Underconsumption
• Overproduction

[edit] Effects of recessions

• Bankruptcies
• Banks lending less money
• Deflation (or disinflation)
• Foreclosures
• Reduced sales
• Stock market crash
• Unemployment