Ever since the economist Julius Shiskin coined the term ‘recession,’ it has been widely used for various purposes.
It may surprise you that the term has been utilized to describe everything from the current economic downturn from the 1929 stock market crashes, wars, endemic illnesses, pandemics, and even wars, including the current Russian embargo, as devised by the UN.
That is why it is worthwhile asking the question, “What recession means?”
On taking a closer look at “What recession means?” you soon realize that this term is usually coined when the GDP or gross domestic product faces a sharp downturn, twice or thrice in a row.
This is often a good indicator that the country’s economy could improve. The term ‘recession’ was usually applied in the past to Developed nations such as the US, EU, and Great Britain. The term has evolved to include countries such as India, China, Sri Lanka, Maldives, Seychelles, South Africa, and more.
The term is truly world-encompassing, and when used, it can often have a negative connection to the economy.
For example, several independent agencies, from Moodys and Fitch to the World Bank, often keep an eye out on indicators such as GDP, industrial output, energy purchases, defense acquisitions, the non-farming sector, and more.
Understanding Recession:
It is easier said than done, but in a nutshell, a recession is often an indicator of something much worse, a prolonged downturn in the nation’s economy. Ukraine would be the perfect example.
Before the Russian invasion, Ukraine’s economy was doing quite well. But ever since Russia decided to invade Ukraine, all guns blazing, its economy has hit rock bottom with no end in sight. And if that was not enough, Russia has opted to gridlock Ukraine using a naval blockade.
Grain, which incidentally happens to have been one of Ukraine’s top exports to several nations, was left with most of its produce still locked in Ukraine. The UN had to step in, and with a Turkey-brokered deal, the grain exports were eventually allowed to trickle through. The point is that recession can be a potent tool that nations on opposing sides often use against each other during conflict.
And as Russia remembers, the battle of Stalingrad is often evocative of this struggle when the Russians destroyed all produce before the Nazis invaded the 1940s. Unlike what most people assume, the recession is not a significant and pervasive decline in economic activity.
Instead, it often indicates that almost all economic activity has disappeared. Moreover, products in the market, including bare essentials such as food and water, are no longer available to the public. Take a look at some critical reasons why a recession occurs.
Inflation:
A single factor or a single act does not cause a recession. Instead, it is a slew of dominoes poised to fall. And recession often begins in the same way, with its duration often being long-term rather than short.
Although an economy can recover from a recession, it takes a while for consumer confidence to hit the peak and for a complete recovery to occur. And that’s why most economists view the recession as a long-term wrecking ball rather than something over in a matter of weeks.
And believe it or not, inflation plays a significant role where recession is concerned. For example, when products in the retail market are hopelessly overpriced beyond their base value, that’s inflation in a nutshell.
And when nearly all the products fall under the exact definition, then inflation has set in, and it is a matter of time before consumer confidence hits rock bottom and recession sets in for the long haul.
Stocks, currency price, and forex reserves:
When inflation sets in over a prolonged period, it is natural for consumer confidence to take a significant hit. And coupled with the fact that most labor wages remain at the pre-inflation level, it is only expected that most labor unions would be up in arms.
You can see this play on the ground in Russia as it grapples with the devastating consequences of invading Ukraine.
And when consumer confidence goes for a six, it is natural for stock markets, currency prices, world bank estimates, and even the nation’s forex reserves to hit the basement.
Example
The perfect example would be Syria which had to fight countless wars, raids, and incursions into its territory, not to mention the near depletion of its forex reserves. Today, the national currency is selling at an all-time low against the US Dollar, which clues you into how dire the situation is.
This is what recession is all about. And truth be told, there is a lot more information to share on recession and its short-term impacts, long-term ones, and the eventual light at the end of the tunnel.The fact is that recession is all-too-real and one most nations would have to gear up to face on a war footing.
There is no single factor or cause behind the recession. It has multiple causes, but the most pervasive would be the shortfall in any supply or demand for its products. This is bound to have a severe impact on the country’s economy.
Here’s what you can do should you feel that your nation is on the brink of facing a recession. Make sure you have access to all the bare essentials and even pack in surplus supplies until the situation returns to normal.
