Thursday, May 21, 2009

Recession, Slowdown and the Downturn!

The whole world speaks about it! The working professionals talk about it! The college kids talk about it! School Kids talk about it! Housewives to Retired uncles, cab drivers to Truck owners! Its on the TV! Its on the radio! On the Web! On the press! It is perhaps there - everywhere!

What is this ubiquitous talk of the town about? The great economic Recession. Some call it Slowdown. Others refer to it as the Downturn. These terms are used interchangeably by all of us. But, in reality, are they the same things? What are they? How did they enter each of our frquently used words in our Vocab?

Recession - A recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. US is clearly hit by Recession today!
Slowdown - A market slowdown doesn't necessarily mean loss. It simply means less people are trading. India, as it stands today experiences a slowdown! It still, has not reached the levels of Recession.
Downturn - An economic downturn is when you start to leave the boom phase and start moving down the cycle to a recession. The current recession in a few countries and a slowdown in few others are all a phase in the Economy Downturn!

So, how did it all start?
It all started with the Sub-Prime crisis in the US, the housing market bubble burst. Lending money against homes to borrowers leading to debt defaults. Property prices fall. Home loans precolosed. Property on sale. This led to a chain reaction - Lehman brothers turned bankrupt. Stock prices fell. Companies lost money. Cost control and Cost cutting. Job losses. Obviously, when US catches a cold, the whole world sneezes! Fall from a state of Hyper growth to complete state of lull!

Every economy is sure to go through repetitive cycles of boom, slowdown and recession. Maybe its just time for all of us to redo some Economics lessons!

1 comment:

thenewbnb said...

i am indeed impressed by your gyan, ma ;) next time i need to make a statement, i'll come here to check wht is the right terminology ;)