Tuesday, October 27, 2015

Behind the Hitch: The Causes of Economic Recession (part 2 of 2)


Overconsumption can also be a cause of recession.  Spending more that what is necessary may lead to recession and poverty.  And example will be the major fuss over the expenditure of the United States in the Iraq war.  Economists are saying that the United States should be careful with their consumption in the future.

Government economic policies can be used to avoid economic recession.  But failure to provide good economic policies can lead to recession.  There are some errors that can be made in economic policies.  There are some economic policies that can lead to a boom and bust.  This means that the economy is running in an unsustainable pace.  Inflation is increasing.

Another policy error is that the policymakers themselves are not attentive enough to see the increasing inflation and onset of recession.  Policymakers often times regard the onset of recession as just a slow economic growth and will correct themselves.  But failure to address this may lead to more economic disasters.

Economic recession is not just a United States issue.  The United Nations expressed an alarm that there might be a global economic recession as early as January 2008.  According to United Nations, world economic growth for 2008 is estimated to be on 3.4 percent, flowing from the down trend since 2006 (3.9 percent) and 2007 (3.7 percent).

The bursting of the housing market bubble of the United States and the unfolding credit crisis of other countries are some contributing factors for a global recession.  Currently, Latvia, Estonia and Lithuania are in risk of experiencing economic recession due to credit crisis.

To summarize, economic recession can be brought about by external as well as internal economic shocks and widening imbalances in the economy.  Numerous ways can cause recession.  Steps can be undertaken to avoid altogether this kind of economic scenario to happen.  But the most difficult part is to recover from the impacts of this economic turmoil.

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