An economic recession or depression is a period of economic decline, typically characterized by a decline in the gross domestic product (GDP), high unemployment, a decline in manufacturing and industrial production, a stock market crash, and a decrease in consumer spending.
The Great Depression
The Great Depression was a severe economic downturn that lasted from 1929 to 1939. It was the longest and most severe depression of the 20th century. The Great Depression began in the United States and quickly spread to countries around the world. Many factors contributed to the Great Depression, including economic policies and structural weaknesses in the global economy. During the Great Depression, unemployment rates reached as high as 25% and GDP fell by as much as 30%. Many businesses and banks failed, and people lost their savings and homes. The depression had a profound effect on society, leading to widespread poverty and social unrest. Governments around the world implemented various economic policies in an attempt to combat the depression, including increased government spending, protectionist trade policies, and monetary policies such as the devaluation of currencies. The Great Depression had a lasting impact on the global economy and political landscape, leading to the rise of fascist and communist regimes in some countries and shaping the economic policies of governments for decades to come.
The Suez Crisis of 1956
The Suez Crisis of 1956 was a political and military conflict that arose after the Egyptian government nationalized the Suez Canal, a strategic waterway that connected the Mediterranean Sea to the Red Sea. The nationalization of the Suez Canal led to the withdrawal of foreign investments and a decline in international trade, which hurt the economies of Egypt, France, and the United Kingdom, the three main countries involved in the crisis. The crisis also led to a rise in oil prices, as the closure of the Suez Canal disrupted the flow of oil from the Middle East to Europe. This had an impact on the economies of oil-importing countries and also led to inflation in many developed economies.
The Sue Crisis also led to a decline in stock markets around the world and a fall in the value of the British pound and US dollar, as investors sought safe-haven assets in the wake of the crisis. The Suez Crisis also had a long-term impact on the global economy, as it led to a shift in the balance of power in the Middle East and contributed to a decline in the influence of the Western powers in the region. It also had a lasting impact on international relations, as well as on oil prices and the global economy. The crisis also contributed to the formation of the OPEC and the oil embargo in 1973 which had a significant effect on the world economy.
The International Debt Crisis of 1982
The International Debt Crisis of 1982 was a financial crisis that arose from the inability of several developing countries to repay their debt to international creditors. The crisis began in the early 1980s, when several Latin American countries, as well as some countries in Africa and Asia, found themselves unable to service their debt and were forced to seek assistance from the International Monetary Fund (IMF) and other international organizations. The crisis was caused by several factors, including a rise in interest rates, a fall in commodity prices, and a decline in economic growth in many developing countries. The crisis was also exacerbated by the fact that many developing countries had borrowed heavily in the 1970s, during a period of high commodity prices and strong economic growth, and were now facing a difficult economic environment.
The International Debt Crisis had a significant impact on the global economy. Developing countries affected by the crisis saw a decline in economic growth and an increase in poverty and unemployment. The crisis also led to a decline in foreign investment in many developing countries. The International Monetary Fund (IMF) and the World Bank responded to the crisis by providing financial assistance to affected countries, in exchange for economic reforms such as austerity measures, structural adjustments, and trade liberalization. These measures had a significant social and economic impact on the affected countries and were criticized for their negative effects on the poor and vulnerable populations.
The International Debt Crisis also had an impact on the global financial system, as many banks and other financial institutions that had lent money to developing countries were at risk of default. The crisis led to a decline in the value of the US dollar and a rise in the value of other currencies, as investors sought safe-haven assets in the wake of the crisis. The International Debt Crisis of 1982 was a major event in the history of the global economy, and its effects were felt for many years afterward. It also led to important changes in the way the international financial system operates and the role of the IMF in providing financial assistance to developing countries.
The East Asian Economic Crisis 1997-2001
The East Asian Economic Crisis, also known as the Asian Financial Crisis, was a period of financial and economic turmoil that affected several countries in East Asia, including Thailand, Indonesia, South Korea, and Malaysia, between 1997 and 2001. The crisis was characterized by a sharp devaluation of currencies, a decline in stock markets, and a rise in interest rates, and had a significant impact on the economies and people of the affected countries. The crisis was triggered by several factors, including a rapid increase in debt, a property market bubble, and a lack of transparency in the financial systems of the affected countries. Many of these countries had experienced rapid economic growth in the preceding years and had attracted large amounts of foreign investment, but their economies were not well-equipped to handle the sudden influx of capital.
The crisis led to a sharp devaluation of currencies in the affected countries, which made it difficult for businesses and individuals to repay their debt. This, in turn, led to a wave of bank failures and a decline in economic activity. The crisis also led to a decline in the value of stock markets and a sharp increase in interest rates, making it more difficult for businesses to access credit.
The International Monetary Fund (IMF) intervened to provide financial assistance to the affected countries, in exchange for economic reforms such as austerity measures, structural adjustments, and trade liberalization. These measures had a significant social and economic impact on the affected countries and were criticized for their negative effects on the poor and vulnerable populations. The East Asian Economic Crisis had a significant impact on the global economy, as the crisis led to a decline in economic growth and a fall in stock markets around the world. It also led to a decline in foreign investment in many developing countries, as investors became more cautious about investing in countries facing economic problems.
The East Asian Economic Crisis of 1997-2001 was a major event in the history of the global economy, and its effects were felt for many years afterward. It also led to important changes in the way the international financial system operates and the role of the IMF in providing financial assistance to developing countries.
The Russian Economic Crisis 1992-97
The Russian Economic Crisis of 1992-1997 was a period of economic turmoil and financial instability that affected the Russian Federation following the collapse of the Soviet Union. The crisis was characterized by hyperinflation, a sharp decline in industrial production, and a sharp fall in the value of the Russian ruble.
The crisis was caused by several factors, including the massive structural and political changes that occurred following the collapse of the Soviet Union, the rapid privatization of state-owned enterprises, and the lack of a clear economic plan or strategy. Additionally, the crisis was exacerbated by the failure of the government to implement necessary economic reforms, and the ongoing conflicts in the region. The Russian economic crisis had a significant impact on the lives of the Russian people, as living standards declined sharply and poverty and unemployment increased dramatically. The crisis also led to a decline in foreign investment and a fall in the value of the Russian ruble.
The government responded to the crisis by implementing several economic reforms, such as the introduction of a new currency, the Russian ruble, and the implementation of a tight monetary policy to combat hyperinflation. The government also implemented several structural reforms, including the privatization of state-owned enterprises, the liberalization of prices, and the opening up of the economy to foreign trade and investment. The Russian Economic Crisis of 1992-1997 had a significant impact on the global economy, as the crisis led to a decline in economic growth and a fall in stock markets around the world. The crisis also led to a decline in foreign investment in Russia and other countries of the former Soviet Union, as investors became more cautious about investing in countries facing economic problems.
The Russian Economic Crisis of 1992-1997 was a major event in the history of the Russian economy and had a lasting impact on the country’s economic and political landscape. It also had important lessons for other countries undergoing the transition from a planned to a market economy.
Latin American Debt Crisis in Mexico, Brazil, and Argentina 1994-2002
The Latin American Debt Crisis of 1994-2002 was a period of economic turmoil that affected several countries in Latin America, including Mexico, Brazil, and Argentina. The crisis was characterized by a sharp devaluation of currencies, a decline in economic growth, and a rise in interest rates. The crisis had a significant impact on the economies and people of the affected countries. The crisis was triggered by several factors, including a rapid increase in debt, a lack of transparency in the financial systems of the affected countries, and the failure of governments to implement necessary economic reforms. Many of these countries had experienced rapid economic growth in the preceding years and had attracted large amounts of foreign investment, but their economies were not well-equipped to handle the sudden influx of capital.
The crisis led to a sharp devaluation of currencies in the affected countries, which made it difficult for businesses and individuals to repay their debt. This, in turn, led to a wave of bank failures and a decline in economic activity. The crisis also led to a decline in the value of stock markets and a sharp increase in interest rates, making it more difficult for businesses to access credit. The International Monetary Fund (IMF) intervened to provide financial assistance to the affected countries, in exchange for economic reforms such as austerity measures, structural adjustments, and trade liberalization. These measures had a significant social and economic impact on the affected countries and were criticized for their negative effects on the poor and vulnerable populations.
The Latin American Debt Crisis of 1994-2002 had a significant impact on the global economy, as the crisis led to a decline in economic growth and a fall in stock markets around the world. It also led to a decline in foreign investment in many developing countries, as investors became more cautious about investing in countries facing economic problems. The Latin American Debt Crisis of 1994-2002 was a major event in the history of the global economy and its effects were felt for many years afterward. It also led to important changes in the way the international financial system operates and the role of the IMF in providing financial assistance to developing countries.
The Great Recession
The Great Recession was a period of economic decline that lasted from December 2007 to June 2009. It was considered the most severe recession since the Great Depression of the 1930s. The Great Recession began in the United States and quickly spread to other countries around the world. The primary cause of the Great Recession was the collapse of the housing market in the United States, triggered by the widespread use of risky subprime mortgages and lax lending standards. The housing market crash led to a decline in housing prices and a wave of foreclosures, which in turn led to a decline in consumer spending and a decrease in economic activity.
As the recession deepened, several large financial institutions, such as Lehman Brothers, failed, leading to a financial crisis and a credit crunch. This made it difficult for businesses and consumers to access credit, further exacerbating the economic decline.
Governments around the world implemented various policies to try to combat the recession, including monetary policy measures such as interest rate cuts, fiscal policy measures such as stimulus spending, and bank bailouts. Despite these efforts, the recession caused high levels of unemployment, a decline in GDP, and a fall in stock markets around the world. The Great Recession had a profound impact on the global economy, leading to widespread job losses, a decline in economic activity, and a loss of wealth for many people. It also led to significant changes in economic policy and regulations, particularly in the financial sector, to try to prevent a similar crisis from happening again in the future.
Current Scenario
The current economic crisis is a downturn in the global economy that is caused by the COVID-19 pandemic, the Ukrainian war, devaluing currency, Economic sanctions on Russia and Iran, New Strategic alignment, and US-China competition. It has resulted in widespread economic disruptions around the world, leading to a decline in consumer spending, an increase in unemployment, and a fall in economic activity.
Similarities between the current economic crisis and previous economic recessions include a decline in the gross domestic product (GDP) and an increase in unemployment which stands at 6.4% from 5.4% in 2021. Businesses, particularly small and medium-sized enterprises (SMEs) are facing severe economic challenges, with many closing down or filing for bankruptcy. Consumer spending also took a hit as people become more cautious about spending money and saving for uncertain futures. The current crisis also has some similarities to the 2008 financial crisis, as it has led to a decline in stock markets and a fall in the value of many currencies. The crisis has also led to a decline in foreign investment and a rise in uncertainty in the global economy, populist leadership.
Governments around the world are taking measures to mitigate the economic impact of the crisis, including fiscal policies such as stimulus spending and monetary policies such as interest rate cuts. Central banks are also taking action to provide liquidity to the financial system and to support the economy. The current economic crisis is a reminder of the interconnectedness of the global economy and the importance of swift and coordinated action to mitigate the economic impact of such crises. The crisis has also highlighted the importance of economic diversification, and the need for countries to build resilient economies that can withstand future shocks.
Related
FAQs
What happens if USA goes into recession? ›
What Happens in a Recession? Economic output, employment, and consumer spending drop in a recession. Interest rates are also likely to decline as the central bank (such as the U.S. Federal Reserve Bank) cuts rates to support the economy.
Is there another recession coming for the US economy? ›Many economists agree that the U.S. is, for now, not in a recession. The most recent gross domestic product report published last week showed the U.S. economy grew by 2.9% in the fourth quarter of 2022, following growth of 3.2% in the quarter before.
What do economist predict for 2023? ›Global growth forecast to slow to 1.9% in 2023, warn UN economists.
Are we headed for another Great recession? ›While the consensus is that a global recession is likely sometime in 2023, it's impossible to predict how severe it will be or how long it will last.
Who benefits during a recession? ›Economists often see a massive increase in demand for their services as the general public, businesses, and policy makers grapple with the recession. Consultants, government policy advisors, and even media personalities may also find opportunities to market their expertise during uncertain economic times.
What should you not do in a recession? ›- Obtaining an adjustable-rate mortgage. ...
- Becoming a Cosigner. ...
- Undervaluing your job. ...
- Considering new debt. ...
- Investing at high-risk.
The findings, reflecting a survey of economists from businesses, trade associations and academia, were released Monday. Fifty-eight percent of survey panelists continue to believe a recession is likely to occur in 2023.
Are we headed for a recession in 2023? ›Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.
How severe will the next recession be? ›Is there going to be a recession in 2022? The most likely scenario is still a modest recession that lasts six to nine months or so. Eighty-eight percent of economists predict a downturn will be mild, according to a survey earlier this month by Wolters Kluwer Blue Chip Economic Indicators.
What is the geopolitical risk for 2023? ›What are the geopolitical risks in 2023? The war in Ukraine and US-China tensions pose the most significant risks to the global economy in 2023 and beyond. Russia's invasion of Ukraine has rapidly inflated energy and food prices, leading to cost issues for businesses and soaring living costs for consumers in 2022.
How do I prepare for the economic collapse of 2023? ›
- Focus on budgeting and building an emergency fund. ...
- Prioritize paying off high-interest debt. ...
- Update your résumé ...
- Get creative about saving. ...
- If you have savings to invest, be savvy about it.
A near-term downturn is unlikely
Is it possible that a recession will hit in 2023? Absolutely. But the likelihood of a first quarter recession is pretty low. Right now, unemployment levels are almost the lowest they've been in 20 years, and consumer spending has yet to decline in a meaningful way.
As spending shifts to basics, consumer staples, utilities, and other defensive stocks may fare better. Companies with strong balance sheets will also be able to weather a temporary decline in profits more than a high-spending growth stock.
How do you prepare for another Great Depression? ›- Start with your debts. ...
- Create a budget. ...
- Save up emergency funds. ...
- Pay off high-interest debt accounts. ...
- Evaluate any investment decisions. ...
- Build up your resume. ...
- Pick up a side hustle. ...
- Work with your creditors.
While no investment is guaranteed to be recession-proof, some tend to perform better than others during downturns. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and income investments.
Who suffers the most during a recession? ›...
The riskiest industries to work in include:
- Real estate.
- Construction.
- Manufacturing.
- Retail.
- Leisure and hospitality.
In general, prices tend to fall during a recession. This is because people are buying less, and businesses are selling less. However, some items may become more expensive during a recession. For example, food and gas prices may increase if there's an increase in demand or a decrease in supply.
How do people get rich in a recession? ›The easiest way to get rich during a recession is to invest as much money into the stock market as you can. When there's a recession, stock market performance declines. Consumers spend less and companies earn less, causing investors to worry.
Is it smart to buy a house during a recession? ›Buying a home during a recession can sometimes be a good idea — but only for people who are lucky enough to remain financially stable. Mortgage rates may drop as the Fed tries to help the economy recover, and with fewer qualified buyers and less competition, home prices can drop as well.
What will the US economy look like in 2023? ›We forecast that real GDP growth will slow to 0.3 percent in 2023, and then rebound to 1.6 percent in 2024. US GDP growth defied expectations in late 2022, but we expect persistently high inflation and rising interest rates to tip the economy into a brief and mild recession starting in Q1 2023.
How long will a recession last in the US? ›
Recessions can last from a few weeks to several years, depending on the cause and government response. Data from the National Bureau of Economic Research shows that between 1854 and 2022, the average recession lasted 17 months.
How long 2023 recession will last? ›That's the prediction of The Conference Board. But some economists project the U.S. will avoid a contraction in GDP altogether.
What are signs of a recession? ›- A slowdown in consumer spending.
- A spike in unemployment.
- The slowing of manufacturing activity.
- A drop in personal income through job loss.
- An inversion of the yield curve.
The US economy just proved it's making strides in combating sky-high inflation — and it means a recession this year could be avoided after all. The Consumer Price Index, one measure of inflation, rose 6.5% year-over-year in December, which marked a big drop from the November reading of 7.1%.
Is the world's economy going to collapse? ›The global economy could face a recession and one of the weakest paces of growth on record in 2023, according to annual projections released Tuesday by the World Bank Group, following a year of accelerated inflation, worsening financial conditions and Russia's invasion of Ukraine.
Will inflation Bring recession? ›While inflation does not have to trigger a recession, governments try to tame inflation by slowing down all of that spending. Slowing down economic activity doesn't always lead to a recession, but if that slowdown becomes a self-sustaining cycle it very easily can.
What are the world problems in 2023? ›Most respondents to the 2022-2023 Global Risks Perception Survey (GRPS) chose “Energy supply crisis”; “Cost-of-living crisis”; “Rising inflation”; “Food supply crisis” and “Cyberattacks on critical infrastructure” as among the top risks for 2023 with the greatest potential impact on a global scale (Figure 1.1).
What are the top issues for 2023? ›- Rescuing the Sustainable Development Goals. ...
- Taking Stock of an Intensifying Climate Crisis. ...
- Managing the Fallout from COVID-19's Long Tail. ...
- Delivering record levels of humanitarian need driven by conflict and disaster.
That said, if you have cash to invest, you may want to consider buying recession-friendly sectors such as consumer staples, utilities and healthcare. Stocks that have been paying a dividend for many years are also a good choice. These tend to be long-established companies that can withstand a downturn.
What products sell best during a recession? ›- Consumer staples. There are some items that you need no matter what the stock market is doing. ...
- Camping gear. Lavish vacations to distant lands are not as attractive during recessions. ...
- Automotive parts. ...
- Coffee and tea. ...
- Tupperware. ...
- Candy. ...
- Cosmetics. ...
- Pet care products.
What to do with money during recession? ›
- Make your dollars go further. ...
- Take another look at your spending. ...
- Get rid of high-interest credit card debt. ...
- Extra cash? ...
- Stay the course with your investments and think long term. ...
- Consider rolling over to a Roth IRA.
A depression is a more extreme economic downturn, and there has only been one in US history: The Great Depression, which lasted from 1929 to 1939.
What assets are recession proof? ›Cash (like an emergency fund), large cap stocks and gold can be good investments during a recession. By contrast, certain stocks that tend to fluctuate with the economy and, more recently, cryptocurrencies, can be unstable during recessions.
What industries thrive in a recession? ›Generally, the industries known to fare better during recessions are those that supply the population with essentials we cannot live without that. They include utilities, health care, consumer staples, and, in some pundits' opinions, maybe even technology.
What are the worst investments during inflation? ›The worst investment to put money into, during periods of inflation, are long-term, fixed-rate interest-bearing investments. These can include any interest-bearing debt securities that pay fixed rates, but especially those with maturities of 10 years or longer.
Can the Great Depression happen again? ›Could a Great Depression happen again? Possibly, but it would take a repeat of the bipartisan and devastatingly foolish policies of the 1920s and ' 30s to bring it about. For the most part, economists now know that the stock market did not cause the 1929 crash.
What are 2 things that caused the Great Depression? ›What were the major causes of the Great Depression? Among the suggested causes of the Great Depression are: the stock market crash of 1929; the collapse of world trade due to the Smoot-Hawley Tariff; government policies; bank failures and panics; and the collapse of the money supply.
What officially brings an end to the Depression? ›When Japan attacked the U.S. Naval base at Pearl Harbor, Hawaii, on December 7, 1941, the United States found itself in the war it had sought to avoid for more than two years. Mobilizing the economy for world war finally cured the depression.
Will prices go down in a recession? ›During recessions, as rates go up and inflation cools, prices on goods and services fall and our personal savings rates could increase, but that all depends on the labor market and wages.
What do people buy most in a recession? ›- Food. Everyone needs to eat and offering some food items can be a great way to expand your product offerings during an economic downturn. ...
- Personal Care Items. ...
- Cosmetics and Related Services. ...
- Pet Care Products and Services. ...
- Clothing. ...
- Baby Items.
What should I buy before a recession? ›
Invest in recession-proof industries.
Fear of buying the wrong stock can be mitigated by investing in established, well-known businesses. Investors may want to consider sectors that generally do well in an economic slowdown, such as consumer staples, utilities and healthcare.
Tim Simons, a money market economist at Jefferies, thinks that 2023 will see a “classic recession.” He predicts that the downturn will begin at the corporate level in the first half of 2023, leading to reduced headcounts. By mid-2023, he predicts that economic growth will slow and inflation will begin to dissipate.
Is it better to have cash or property in a recession? ›In addition, during recessions, people with access to cash are in a better position to take advantage of investment opportunities that can significantly improve their finances long-term.
Should I buy a house now or wait for recession? ›Lower Home Prices – There are fewer homebuyers during a recession. This low demand from the buy-side will cause home prices to fall. Therefore, you can typically get a better price on a home when buying during a recession. Less Competition – Fewer homebuyers means less competition and a more relaxed homebuying process.