Recession - Reasons, Consequences and Remedies

You can be at variance about the definition of recession, but the chances are that present economic crisis (especially in United States) will make it to the list of recessions by any definition. It may not be that serious in all regions but news of credit crunch and bailout plans are coming from other countries as well. Recession is quite simple to understand; especially when you know the next stage of this economic turmoil is called "depression" (the word pretty much sums it up). Recession is an extended period of economic decline (a fall in GDP growth, employment rate, production and Personal Income, etc for two or more quarters). One or few of these problems are always there in most economies, however, we don't "cry recession" as soon as there's a drop in employment rate or GDP. Recession is a continuation of some economic crisis for a longer period.

Reasons:
There are many things that can trigger recession, wars, wrong government policies (of course the intentions are right, but some policies may not go as planned) or interest rates to name some of them. For instance recent recession is blamed largely on excessive "sub prime" loans. Contracting monetary policies caused that famous great depression back in 1929 and increased oil prices triggered a severe recession back in 1973. It's not that these causes always result in a recession, at some instances they are handled quite easily, at other times things get out of control. Mostly, when one trouble is followed by another and then another, the economy starts to cripple.

Consequences:
Although the reasons are different, consequences are often the same. High unemployment rates, financial markets failure, stock exchange collapses, businesses going bankrupt, downsizing in major corporations, low production, are just some of these consequences. Panic strikes in all segments of the society, working and lower-middle class might be afraid of loosing their jobs; large businesses will fear significant drops in sales, and government will be bothered by the public outrage. Investors are reluctant to invest in stuttering economy and consumers hold their money instead of spending.

Remedies:
A good thing about recession (or call it a relief if you think there's nothing good about recession) is that it takes time to develop and can be spotted way before it builds up into a recession. Ups and downs are a part of business or economic cycles and cannot totally be avoided; however precautionary measure at government or individual levels can cut the damage down to a minimum. On a personal level, you can prepare yourself better by saving more, keeping your expenditures to an essential minimum and when you feel too depress of the situation, remember the saying "In every chaos, there is an opportunity."

Source:
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