Recession is the Double-edge Sword of an Economy
A
recession
is the one sure sign that the economy is in a restructuring phase. It will
ultimately uncover which businesses have a clear chance of success or are at the
brink of collapse and failure. The resent economic downturn was the worst since
the great depression and the stock market crash of 1929; at that
particular time many
businesses became insolvent and failed while the employment roles soared to great highs causing
financial chaos and even death.
This latest financial catastrophe was
mainly due to bad
business ethics on the part of the barons of Wall Street having little or no
oversight of their financial dealings (bad management). Ultimately, the federal government
(US Congress) had to rescue the failing economy with a 700 billion bailout at the
taxpayer’s expense.
Above it all, I still feel that the taxpayers are getting the royal shaft and
the next generation of taxpayers will bear the brunt of the 700 billion bailout
of wall street. In the short run and after
saving Wall Street (big business), Main Street (US taxpayers) are being abandoned, saddled with
looming unemployment and rising foreclosures.
Even with the economy in shambles, I remain optimistic that we
will climb out of the deep trench we are in. Our capitalism system is still very
strong and will emerge even stronger than ever when we begin to see people
paying there mortgages because they are not unemployed. You must understand that
capitalism is an economic system in which land,
capital goods, and other resources, are owned, operated and traded by private
individuals or corporations for the purpose of profit. But this system has its
own flaws; (case and point) the latest economic recession and financial system
melt down.
These downturns are contraction phases of the business cycle. The business cycle
or economic cycle refers to the fluctuations of economic activity and about
its long-term growth trend. The cycle involves
shifts over time between periods of relatively rapid growth of output (recovery
and prosperity), and periods of relative stagnation or decline (contraction or
recession).
These fluctuations are
often measured using the real gross domestic product (GDP). Despite being named
cycles, these fluctuations in economic growth and decline do not follow a
purely mechanical or predictable periodic pattern.
The U.S. based
National Bureau of Economic Research (NBER) defines a recession more broadly as
"a significant decline in economic activity spread across the economy, lasting
more than a few months, normally visible in real GDP, real income, employment,
industrial production, and wholesale-retail sales." A sustained one
may become a depression.
You will see increases in claims for unemployment
insurance benefits, mortgage foreclosures will skyrocket and reduced access
to business funding or credit. We are in for some terrible times.
In the past weeks we
have experienced an episode of such a downturn in our economy, due to liquidity
problems in our financial markets. We have also recently experienced large bank
failures and rescues by our federal government.
In this latest financial crisis our president
swiftly sent a proposal to the
U.S. congress to take the pressure off the overly burdened
economy and financial markets; urging them to pass his 700 billion
dollar rescue measure to avoid an
economic collapse (depression).
During this slowly developing downturn, financial
institution failures are the precursors of other maladies that we are
expecting in the coming days and months to come.
If you are interested, there are things you can do to
recession proof your life.
If you are use to using credit cards to make your purchases, start using
debit cards or cash.
Start a budget. (Sample
budget)(Ref.
article)
Start a savings account. If you have multiple savings accounts never keep
those accounts over the FDIC limits. That way your deposits will be totally
secured against any bank failure.
If you have consumer debt, keep your accounts current, never be late making
payments. When available seek a lower interest rate and/or adjust the
terms.
Seek information about entrepreneurship.
The bottom line is that until we take care of the
fundamental problem of fixing the foreclosure problem, we are headed to the
worst one in
U.S. history.
Recession update: Good news, it appears that the recession is coming to a close.
For you and me on main street, it is still not over until we begin to see the
unemployment numbers begin to come down, but the overall economy has risen more
than 3% in
the last quarter putting the economy in positive growth territory. It was
negative when the recession began a year ago. Much of the growth is being
attributed to the stimulus package, exports to 3rd world countries and the "cash
for clunkers" program. Further, the president is proposing a summit to be
held in the near future to tackle the unemployment chalenge. **************************************
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