The Causes and Effects of Global Recession.

Topics: Financial crisis, Recession, Inflation Pages: 9 (3705 words) Published: December 11, 2010

Here a definition a recession as well a global recession is mentioned. Some causes and effects has been listed. Due to recession occurring, I have identified the effects of recession based on Tesco.

The causes and effects of global recession.

Global financial crisis, increasing for a while, began to show its results in the mid of 2007 into 2008. Worldwide stock markets have subsided, financial institutions have dropped and governments in even the richest nations have had to develop packages to assist their financial organizations. Recession is defined as a slowdown of activities in the economy over a time. The major effect of recession is Inflation as well as currency crisis. A decrease in income may be another effect of recession in the economy. As persons try to save more, this reduces sales therefore there is a result of no profits. Another effect may be increase in mortgage rates. At the time of recession, lenders tend to increase rate in order to cover their losses. While in recession employment occasions are reduced since companies tend to cut down on these opportunities thus leading to unemployment in the economy.

Countries around the world are being driven into recession as the economic downturn deteriorates. In Europe, Germany, Italy, Ireland and Denmark they have all suffered two consecutive quarters of economic decline the first is the technical definition of a recession and secondly it was already present before. Japan joined the list as it surprised economists and reduced in size in the ending of the year. The UK economy shrank in the third quarter of 2008, and is expected to contract through most of 2009. Many are expecting a new world order with economic power shifting to countries in the east who are better placed to weather the downturn. However, developing economies rely on the west to buy their goods, so recessions in the US and UK will also hurt them. This was according to The effects of recession may be seen as bankruptcies, deflation, a reduction in sales, crash in the stock market and most importantly unemployment. Causes of global recession may be because of the sub-prime lending crisis and rising of oil prices. The main effects of recession are a decrease in profitability, decline in the stock market and difficulty in borrowing.

The financial crisis from 2007 to present is a result of the banking system in the United States. This has resulted in the disintegration of financial institutions, bailout of bank by national governments and slumps in stock markets worldwide. In various areas, housing markets has also suffered. Although the credit crunch in the US was costing America and Europe immense job losses, financial professionals were influenced that Africa will NOT BE unharmed by the global financial crisis because of where it is located. The impact of the US credit crunch on Africa was narrow as a result of the restrictions of ownership. Due to the lack of trade finance is causing stockpiles to build up at Southern Africa’s coal port, because of this, coal trade has fallen drastically. Africa was unharmed for some time. Nevertheless, when the recession strengthened in the First World, the effects were being felt. According to reports people working in the construction, automotive, tourism, finance, services and real estate sectors will be mostly affected during these hard times. Africa’s export and import industries have changed due to the credit crunch in the US. Africa depends heavily on exports of its raw commodities such as oil and coal, and since the US credit crunch the countries that purchases Africa’s exports have been unable to retrieve credit. This has caused a great fall in exports and consecutively resulted in deceased prices. Credit crunch meaning a scarcity of money, declining house prices which is related to a lack of...
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