Recession can be defined as an overall economic downturn that deals a severe blow on both the real economy and financial markets. The 2008-2009 global recession started with excessive risk-taking and limitless consumer crediting and resulted in the credit crunch. The further scenario is well-known: slowdown in the housing sector, surging energy prices, decline in lending activity and purchasing power, job losses and high unemployment rate, deterioration in industrial production, and so on. Recession spans on all sectors of the economy.
The economy has suffered from stringent credit market conditions and lack of cash flow to maintain tolerable level of business activity. The situation is aggravated by the general state of uncertainty. Startling volatility leaves investors with a subtle hope for economic upturn. Dire expectations for the future incite risk-aversion moods among investors. This plunges the economy into a deadlock. One has nothing to do but to guess whether the downfall has already reached the bottom or not by the first signs of economic recovery. As the practice has shown there is no point in making forecasts.
However, it makes sense to take into consideration the theory of economic cycles. According to it, recovery always comes after recession. The slowdown in economic activity is seen every 10-12 years, but this time the scope of recession has been so severe that it is fairly compared with the Great Depression of 1932-1933. The economic growth is reflected well by means of stock market indices.
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