What Causes A Recession & How Long Will It Last?

[Ridzuan AM]

 

The United States is moving towards an inevitable economic recession and possibly worse than the previous, two common questions will pop up. What are causes of economic recession? How long will it last? The definition of a recession is a decline in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. The gross domestic product (GDP) in the United States is tracked by the Commerce Department’s Bureau of Economic Analysis. A recession may involve declines at the same time in the measures of overall economic activity such as employment, investment, and corporate profits. Recessions may also be a combined with deflation , or alternatively, sharply rising prices or inflation. An economic depression is a severe or long recession. The Recession History 1929 to late 1930s, Great Depression, stock market crash, banking collapse in the United States sparks a global downturn. Durations: 43 months 1937, second downturn of the Great Depression. Durations: 13 months 1945, Duration: 8 months 1948 - 1949, Duration: 11 months 1953 - 1954, Post-Korean War Recession - The Recession of 1953 was a demand-driven recession due to poor government policies and high interest rates. Duration: 10 months 1957 - 1958, Duration: 8 months 1960 - 1961, Duration: 10 months 1969 - 1970, Duration: 11 months 1973 - 1975, Oil crisis, a quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War leads to stagflation in the United States. Duration: 16 months 1979 - 1980, 1979 energy crisis, the Iranian Revolution sharply increases the price of oil. 1981 - 1982, Duration: 16 months 1982 and 1983, Early 1980s recession, caused by tight monetary policy in the U.S. to control inflation and sharp correction to overproduction of the previous decade which had been masked by inflation. 1980 to 2000, Great Commodities Depression - general recession in commodity prices. 1990 to 1992, Early 1990s recession - collapse of junk bonds and a credit crunch in the United States leads to one quarter of US GDP decline, and therefore not an official recession. 1990 to 2003, Japanese recession -collapse of a real estate bubble and more fundamental problems halts Japan’s once astronomical growth 1997, Asian financial crisis - a collapse of the Thai currency inflicts damage on many of the economies of Asia. 2001 to 2003, Early 2000s recession - the collapse of the Dot Com Bubble, September 11th attacks and accounting scandals contribute to a relatively mild contraction in the North American economy. Since the US GDP never actually declined in this period it is not considered an official recession. “The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it” - Ronald Reagan, 40th president of US (1911 - 2004)