The positive aspects of a recession
As Joseph Schumpeter passionately argued in his 1942 book Capitalism, Socialism and Democracy, recessions are a necessary evil in capitalist societies. Well, there are some arguments, that back up this theory. Although the word recession strikes fear into the hearts of people, recessions heal the economy from unrealistic developments and creates opportunities for investors. In the long run it is just a periodic downturn in the economic cycle and for some good reasons it seams.
Effects on the economy
Recessions correct economic imbalances and helps the economy to get back to a healthy, realistic, and sustainable rate of growth. The “job” of a recession is to clean the “fat” out of the system, mop up excess, and pave the way for the next expansion. However, there are always bankrupts, but in a recession the weak companies get put out of business and the strong ones are forced to optimize their business models and come out with better products. This brings job losses which are freed up to be efficiently used somewhere else in a flexible market. Recessions also eliminate these sorts of unsustainable bubbles like the technology bubble in the late 90s or the actual housing crisis. Of course, it hurts to lose a good paid job and suffer from financial loss, but it is necessary for our economy to become healthy once again.
The Stock market drops
Stocks markets go down in recessions, but as stated in one of my previous articles, Search for opportunities in crises, there are great opportunities in stock market declines. During periods of mass panic on the market all stocks go down for a while, because people like to panic somehow, I don’t know why. The important thing is, both good and bad companies go down. This means, that you can get high quality companies at a low price and with good long-term perspectives. That’s the time to position yourself to profit from these companies and catch the opportunity while it is there.
In fact, I even know a few investment guys, who are really cheered up and looked forward to the upcoming recession because of new investment chances.
Personal finance
According to a report by CNN, I found on moneysocket.com, the average American owes $10,000 in credit card debt annually. If people will ever recognise this misbehaviour, it maybe will happen during a recession. Although, I don’t believe people are easy to change, I think if suffering from financial loss, unemployment and hard times, maybe they start to think about there personal finances and learn something from it.
As we know from the past, a recession lasts for about 10 months, so good times will be back. Nevertheless, they are necessary and you will experience a few recessions in your life, so better be prepared. The important thing is not to panic and learn from crises. In fact, recessions can make you better and more skilled after all, just like they do with our economy on a regular basis.
It is really a great article! While almost all other analysts scare us by just keep on telling us only about the drawbacks of a recession, this articles really points towards the actual positive sides as well. So..it’s not that bad after all. As pointed out the mail causes are the unrealistic developement and greed of people.
Thanks,
Shravan
It is really a great article! While almost all other analysts scare us by just keep on telling us only about the drawbacks of a recession, this articles really points towards the actual positive sides as well. So..it’s not that bad after all. As pointed out the main causes are the unrealistic developement and greed of people.
[...] came across this artcile http://www.worldfinancialblog.com/economy/the-positive-aspects-of-a-recession/ a couple fo days ago and I was rather intruiged. I have been focusing on the positive social [...]
Hi, thank you for this great article, it is really well done!
I am writing a thesis on the positive aspects that the actual recession could have on Ireland’s society.
You gave me a lot of good ideas and reenforced my point of vew on several aspects. It would be a great chance for me to be able to give you some of my ideas to see if you can explain some things on different points.
Thanks again and best of luck for the future!
the Economic Recession has been pretty hard on us. some of my friends lost their job because of the massive job cuts. i just hope that our economy becomes better in the following years.
i can see some improvement in US economy. i just hope that we will be out of this economic recession soon.
Economic recession created huge unemployment rates around the world. I think the world economy is already on the road to recovery.
the economic recession made a lot of workers jobless. my best friend and me lost our jobs because of job cuts. i hope that our economy would recover soon.
the Economic recession made a lot of jobless people in my own country. We could only hope that our economy becomes strong again.
Our country was also hit hard by the Economic Recession. At least we are seeing some signs of economic recovery now. I hope that we could recover soon from this recession.
Our country had been so much affected by this Economic Recession. there are lots of job cuts and company shutdowns. We are seeing some signs of economic recovery right now and we hope that it would continue.
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I think we are also seeing some signs of recovery from the Economic Recession. Of course, we have no idea of how long it will take to completely recover, but some say it’s going to be longer than for the other recessions in decades. I also scanned an article yesterday that said business owners need a new set of tactics to do well during recovery.
during the height of the economic recession, our online and offline business in the US have suffered some major drop in sales. now our sales are getting slowly back to normal.
during the height of the economic recession, our online and offline business in the US have suffered some major drop in sales. now our sales are getting slowly back to normal.
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