Recession Defined

A recession happens when the economy no longer works as it should - economic goods do not sell anymore like they do in normal times, because there is a lack of market for them. Businesses thrive only when there is a good market that generates the revenues for it and the subsequent profits from the operations and making the businesses, and the entire economy, grow.

Technically, the experts agree only on a recession when two consecutive quarters in a year have negative growth, which for the layman means losing his job as a very bad consequence. Job losses cannot be avoided sometimes as the machineries of production of economic goods slow down due to the lack of a market. The goods that are considered as non-essentials in a man's life are the ones that suffer declines in sales ahead of what are supposed to be goods for the basic needs of the people.

One reason perhaps is the miscalculation of what is the actual buying capacity of the people (the market) relative to the volume of the goods produced. For example, a thousand luxury cars may be up for sale fresh from the factories, yet the actual number of people who have the money to afford buying them is much less. So, unsold cars remain as frozen money and this contributes to the start of the sluggishness of business and the economy as whole.

In the case of the present recession confronting us, its start was initially felt when the so-called housing bubble in America flopped and people began to default on their real estate loans which funded the construction of so many housing units. People who bought the housing units did so on credit but the incomes that they were projected to have to pay fir their loans did not come, leading many to be unable to pay their debts. Again, the market that was estimated by the housing sector was not there actually, when they decided to invest so much in the construction of so many houses.

So what should be done now to recover from the present recession? Talk of bailout money runs thick, but is this a viable solution? What will the US government for example bail out - the three top automakers in the country who are in the business of making luxury cars? Bailing them out would mean that they will continue making the cars, but who will buy them? The majority of people do not have the capacity to buy luxury cars, so if these automobile giants are bailed out, will they be able to resolve the recessionary situation?

The plans of the incoming US President to create millions of jobs by launching huge construction projects in the US seems to be the most logical thing to do. The plan will employ millions of workers now with no income at all and give them the money with which they can buy things for their needs. That in effect will make them a new market, to add to what is supposed to be the market figures now of the world. That will be more easily discernable as a viable answer to what should be done on the problem of recession now.

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