Saturday, October 1, 2011


Recession occurs when there is a fall in economic growth for 2 consecutive quarters, but if growth is very low there will be increased spare capacity and people feel there is a recession. This is sometimes called a growth recession. Now we can say - the U.S. is officially in recession, and other countries around the world are rapidly following suit. The recession has had a major impact on consumers. It can be difficult to repay the loan when it represents a large proportion of income, or even more than what you get from work per month.

The recent rise and fall of the crisis in our financial markets is not the failure of free market capitalism. This is the result of government intervention in financial markets.

Here are some of the causes of recessions:

Mortgage Lenders Bust: With record levels of default on subprime mortgages, the number of mortgage lenders going out of the market is at record levels.

Rise in unemployment: About 10% people are those who are not currently earning anything. Working in one or more part-time because they cannot find full-time job, are considered underemployed in their field, or who are working out-of-bounds of their education are considered to be employed by the government.

Normally, unemployment is more or less the same each month. If there is a steady increase in unemployment is usually a sign that the recession is imminent.

Rising Interest rates: Foreclosures are 72%! Very high rates of interest on loans caused many borrowers to neglect their loans, and housing prices have reached the point where borrowers could not afford to pay their loans and more people stopped buying because the prices were too high, the village has become a financial lottery funds down, one by one, the chain reaction.

Increase Credit Card Usage: If the volume and the number of purchases using credit cards is growing, it is usually a sign that people do not have enough money to pay for their needs. So they have to rely on credit cards to pay bills, even if the interest rates are high. Increase in the usage of a credit card usually signals a recession.

Current account deficit. The current account deficit of U.S. is currently 6.5% of GDP. For many years, some economists have said this is nothing to fear. The deficit has so far been financed by Chinese investors willing to buy U.S. assets.

Decline in GDP: If a country's gross domestic product or GDP falls year after year, it's a sure sign that the economy is on the brink of recession. After all, the GDP measures a country's economic performance for the year.

At the same time, inflation will increase. The reason for this is linked to the dark works of the Federal Reserve. Basically, the U.S. government continues to accumulate debt and private ownership of the Fed is going to turn around and buy Treasury bonds by printing more money. It is the devaluation of money that causes inflation.

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