Great Recession: Impending again?

Posted by WorkApp on September 2nd, 2019

Almost a decade has passed since The Great Recession and the world has with many hardships regained its actual economic speed. Today the situation is good, but an inkling of revisit by the recession is making rounds of financial corridors these days. Though people can easily witness job opportunities at job search apps and job search websites, no one can be sure about how long they can last. Recession is not a sudden attendance but a slow process. There are many reasons behind its onset, some intentional and some unintended.

Trade feud between U.S and China

No doubt that U.S and China are the biggest superpowers and their condition influences the rest of the world. The ongoing financial rift between these two nations is enough to trigger financial tension in the world. Trump’s new trade policy with China in which it increased the tariff on many of its products has created a situation of disrupted supplies, increased costs, and a weakened economy. The adamant approach of both countries can be a turmoil to the world’s economy. China is not ready to loosen up its economic control and the U.S is not ready to make good cuts. This situation has loosened consumer confidence which eventually will lead to a type of recession. Once the consumer confidence is dumped, the market will eventually come to a doomed halt. All in all, this situation is viable for a financially crucial era.

The role of the federal reserve

The federal reserve is in a need to put interest rates on a rise. The inflation rate is already at 2% and employment is to its fullest. If the employment will reach to its maximum, then there will be no place for further vacancies which in turn will lead to unemployment. Unemployment will ultimately lead to decreased consumer spending and thus blockage of the market. If federal reserve will keep increasing interest rates, then following changes may happen

  • Increased interest will decrease expenditure on other goods: When households will have to spend more on their monthly EMIs, then they will have to cut down their other expenses. This will lead to a fall down of the goods market and a financial crisis.
  • Debt market will be disturbed: Though the debt market is on unusual high and is suffering from impending burst, increased interest rates will add to the intensity of its deteriorating effects.

Bubble Pop in the Debt Market

One industry on a high may lead to many others on a big low. We have witnessed this situation in earlier recessions when dot-com stocks and mortgage securities led the world in a financial crisis. This time it is the debt market. Statistics prove that due to decreased interest rates debt loads have risen significantly and soon it can pop, spilling the beans of a recession. Moreover, the debts are more on the suspicious customers’ side and thus chances of pop up also on a rise.

Recession is just a foreseeable state, not an imminent one. Timely and wise actions may prevent this situation, or at least mitigate its effects. Even if it happens then wise investments might help you to get benefitted. You can still believe in job search apps and job search websites but be prepared for both the worlds.

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Joined: August 21st, 2019
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