Are we in recession? That may be a stupid question to ask now but yes we have been for more than 2 consecutive quarters.
What makes this recession difference from the one we experienced in 2000 is the fact that there were a lot of factors which were never there before. Eight years ago, this was attributed to the collapse of the dot-com bubble, the September 11 attacks and the accounting scandal.
With the US raising their debt ceiling, are we in a global bail-out bubble that will eventually burst? This video offers a fresh insight into the greatest economic crisis of our age: the one still awaiting us.
This time around, we can blame it on high oil prices, global inflation, a credit crisis which lead to the bankruptcy of some of the most established banks, increased unemployment, and the housing crisis.
So what do you we see? There are a lot of employees who are jobless, people are forced to sell or foreclose their homes, credit markets are frozen making it impossible for businesses and consumers to get a loan and government intervention is needed to try and prevent things from getting worse.
The president together with the help of congress and the senate signed into law a $700 billion bailout plan that will ensure tax breaks for businesses as well as those who invest in alternative energy, increase the limit of insured bank deposits and allow the government to take over huge amounts of devalued assets from beleaguered financial companies.
When this was first voted on by congress, this was shut down but when it was approved by the senate, congress changed its mind making it the largest government intervention in the financial market since the great Depression.
Do we see the fruits of the bailout? Because of everything that is happening in the US, it has affected countries in Asia and Europe as well. Just to give you an idea, stock markets in the world have gone down.
Because of the US market’s volatility, it has forced finance ministers from the group of 7 nations to find different ways to deal with the crisis and get money flowing again. In most cases, the central banks in these countries have decided to flood the market with liquidity. Though this may sound like a good idea, some experts say this will backfire because banks are hoarding the cash and the market will be driven by fear.
A recession no matter how you look at it is inevitable because it is part of the business cycle. In any country, there is a time that the economy expands, slows down, experiences a recession and then recovers.
It may take years for it to happen again and as history has shown, different factors caused the recession to occur. The challenge is how countries address the problem so we will never have to encounter another Great Depression.