The hitch: the causes of the economic recession

The economic situation, in which the gross domestic product of the country or output is maintaining a negative growth of at least two consecutive quarters, or six months, is called the economic recession. For the National Bureau of economic research (NBER), "the recession is a significant decline in economic activity for more than a few months."

The economic recession lasts eleven months and may be up to two years. While the recession, which is a living, is called the economic correction. So far, lasting recession turns into depression.

What causes recessions happen?

The reasons are complex, as well as the simple reasons why economic recession. John Maynard Keynes notes that there are "vitality" as driving elements for a recession. "Vitality" could be the confidence, uncertainty and pessimism. These "vitality" prevent objectivity and quantitative analysis.

An example of where to take these "animal spirits", if consumers lose interest in the products and outputs. On the eve of the economic recession will be overproduction. The offer will exceed the requirements for products and goods.

It will push the company to increase prices and consumers lose confidence and uncertain in the purchase of products. As long as the event that the consumers will stop buying. Another example for this element is the management of the recession will be the psychological impact of the events of 11. the September attacks on consumers and the people.

Some economists suggest that the recession may not only be caused by events that have large or a huge impact on people. Events that hurt certain enterprises or sectors can also cause a recession. Significant innovation or change in the price of the main components necessary to complete the product, can have dramatic effects on some companies. This may cause a reduction of staff or production.

Overconsumption may also be the cause of the recession. They spend more, that what is necessary, it can lead to recession and poverty. And example would be a major fuss expenses of the United States in the Iraq war. Economists argue that the United States should be careful with their consumption in the future.

Government economic policies can be applied to the economic recession. But the failure to ensure that good economic policy may lead to recession. There are some errors, which can be used in economic policy. There are some economic policies, which may lead to boom and bust. This means that the economy is running in at unsustainable levels. Inflation continues to increase.

Another error is that politicians are not attentive itself, rising inflation and recession. Politicians often times only the onset of the recession and slow economic growth, to fix themselves on. But failure to address it may lead to greater economic disaster.

The economic recession is not just a question of the United States. The United Nations expressed alarm that could already be in January 2008, the global economic recession. According to the United Nations, world economic growth for the year 2008 is estimated at 3.4 percent, running from the down trend from 2007 (3.7%) and 2006 (3.9 percent).

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

In short, the economic recession may submit to the external and internal economic shocks and widening imbalances in the economy. How many ways can cause a recession. Steps can be carried out entirely avoid this kind of economic scenario happens. But the hardest thing is to restore from the impact of this economic turmoil.