Today’s Global Economic Down turn

What is Recession and Depression?

In economics, the term Recession generally describes the reduction of a country's gross domestic product (GDP) for at least two quarters. The usual dictionary definition is "a period of reduced economic activity", a business cycle contraction.

The United States-based National Bureau of Economic Research (NBER) defines economic recession as: "a significant decline in [the] economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales.

“Recession cycles are though to be a normal part of living in a world of inexact balances between supply and demand”.

 A Depression is a sustained, long downturn in one or more economies. It is more severe than a recession, which is seen as a normal downturn in the business cycle.

Considered a rare but extreme form of recession, a depression is characterized by abnormal increases in unemployment, restriction of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation or hyperinflation are also common elements of a depression.

What turns a usually mild and short recession or “ordinary” business cycle into a great depression is a subject of concern.

Today we all need to face the reality and know that all is absolutely not well, with the global economic crisis that has been plaguing the world. It seems to be drifting further away from a recession and is heading directly towards a depression with maximum speed.

 Never in history has it been so bad economically, in other words it has shocked the world like a massive earthquake very high on the rector scale. Some thinks is just America and other first world nations that are experiencing this recession but this is not so. If we listen to the news very closely especially on The British Broadcasting Network (98.7 FM or bbcworld.com) and pay attention to news paper clippings, we would learn much.

Another thing is don’t think that this started last year or year before, these things has been going on for years after the Great Depression took place in the 1930’s. These countries especially America have been doing bailouts for a years now.

 Just how they do it? By printing more and more paper money which has been making things worse. For paper money doesn’t have any value and I would add cheques also. The gold does, and therefore if America just keep printing money they won’t have enough gold to back up the dollar, and again the economy would continue time after time on its crashing journey.

Back in the 1930’s Great Depression the gold standard was and is the only standard of money that could bail out this fatal economic down fall of all nations. That’s why Peter Temin and Barry Eichengreen had pointed to Britain’s decision to return to the Gold Standard back in the 1930’s Great Depression. Where is this gold and who has the gold to bailout the world?

This would affect every single kindred, town and nation that’s on the earth, as we see this recession spread like wild fire from country to country. Every day large businesses are closing down because of bankruptcy there are thousand of people losing their jobs, which means more people are growing hungry, murders, kidnappings etc are on the rise.

 As the old saying goes when Wall Street sneezes the whole world catches pneumonia. This is so true ! Because we can see that America controls 90% of the world. United States of America is a very powerful nation that causes other nations to succumb to them.

What cause Bankruptcy in businesses?

Most businesses are formed by borrowing money from the banks and insurance agencies to start their business. When these big loans which runs in to billions of dollars are taken out of banks and agencies to help fund businesses, it’s not the bank’s or the agencies’ money that is being lent out, but yours. Therefore in a time like a recession or depression when unemployment level is very high, food is scarce, and production level drops. These businesses cannot pay back their loans, because how would they make money to pay their dues when everything is on a stand still and productivity level is failing rapidly.

Mortgages are also issued to citizens for houses, land and building’s for businesses. The bank again lends out your money, with all faith and assurance that these people would pay them back, for them to return your money to your account.

Ever noticed that bank’s tries to encourage you not to take lynx/ visas cards? Do you think that they are so interested in you saving your money NO! When you don’t have a card yes it encourages you to save, but the idea for the bank is that you would use less of your money without a card.

Also you would have limited access 8:00am – 2:00pm and till 5:00pm on Fridays, whereas you could access ATMS 24/7 anywhere anytime. This is a big advantage for them to use your money for loans and mortgages. Another thing is if you put in a lot of money in the bank, let’s say a $1 million and up. If you decide to take out all of your money from that particular bank they would tell you that you have to give them notice before hand.

How is it that you have to gave notice for your own money? Isn’t it supposed to be in your account for you to access anytime you want? It has been loaned out to someone ,so the notice is to give them time to accumulate your money from their interests and loans they receive back.

The things I mentioned above droved banks into very big debts and massive failures, stock markets crashed as of a result. Then they cry out for bankruptcy, the next thing you hear is that banks close down with all your money in it and if you are lucky you would get back a small percentage on it or nothing at all. Every bit of your hard earn money have gone down the drain.

We Trinidadians have an example by the Hindu Credit Union, don’t you ever feel too safe and put all your trust in these banks, regardless of what they say. Most of the banks in Trinidad and Tobago are directly linked up with banks in Canada and America which some have already close down with people’s money in it.

The way things are going we cannot put security on these agencies and banks. Clico group of companies and other companies’ right here in Trinidad and Tobago are feeling the overseas effect but staying silent on it. There is no guarantee or assurance on you money. Things are drastically changing every day our own Prime Minister has recently come to the reality that this little dot Trinidad and Tobago that’s on the map is in no way close or near the other great nations that are failing, so who are we in this little country.

Whether you like it or not hard times are ahead, it’s watching us in our eyes hoping we could see it. Many individuals would lose their jobs the government and private owners would not be able to pay workers. So home time would be most of us residing place for good. Their would be very few jobs in the new future

 In the 1920’s Nebraska and the nation as a whole had a lot of banks. At the beginning of the 20s, Nebraska had 1.3 million people and there was one bank for every 1,000 people. Every small town had a bank or two struggling to take in deposits and loan out money to farmers and businesses.

As the economic depression deepened in the early 30s, and as farmers had less and less money to spend in town, banks began to fail at alarming rates. During the 20s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed – 10 times as many. In all, 9,000 banks failed during the decade of the 30s. By 1933, depositors saw $140 billion disappear through bank failures.

Gresham, Nebraska, had two banks – one too many for that small town. The bank in danger of failure merged with the other. Gresham resident Walter Schmitt (right) remembers the deadly consequences for the owner of the failed bank.

When a new president, Franklin Delano Roosevelt was inaugurated in March 1933, banks in all 48 states had either closed or had placed restrictions on how much money depositors could withdraw. FDR's first act as President was to declare a national "bank holiday" – closing the banks for a three-day cooling off period. The most memorable line from the President's speech was directed to the bank crisis – "The only thing we have to fear is fear itself."

Some economists and historians have argued that the bank crisis caused the Great Depression. But others have looked at fundamental economic factors and regional histories and argued that banks failed as a result of the economic collapse.

Whether the fear of bank failures caused the Depression or the Depression caused banks to fail, the result was the same for people who had their life savings in the banks – they lost their money. At the beginning of the 30s, there was no such thing as deposit insurance. If a bank failed, you lost the money you had in the bank. Carla Due's family experienced the fear that a bank failure would wipe out savings.

Birdie Farr's (left) father-in-law, Jack Farr, lost his savings in a Grand Island bank, but he was philosophical about it. Birdie says, "There wasn't nothing for him to do. He said, 'Standing there crying isn't going to help.'"

Louise Dougherty's (right) father owned a bank in Perkins County. When the Depression hit, he worked hard to keep the bank afloat. But the Depression went on too long, and eventually he was forced to go out of business.

There were cases where people line up city blocks away to get their monies out the banks in America. At that time the bank was just offering them 10¢ on every dollar they had deposited. After a short while the banks closed up and announced that all the money ran out.

My friends this happened before when the situation wasn’t as bad. It would happen again. Right now the recession the world is going through is far worst in most cases than the Great Depression that struck the world in the early 1930s. Many people date the beginning of the Depression at October 24, 1929, Black Thursday, the day the stock market crashed.

What happens when the stock market crashes?

After the stock market crashes, the amount of goods and services produced by companies in many countries plunged, and many people lost their jobs.

After the stock market crashes, the amount of goods and services produced by companies in many countries plunged, and many people lost their jobs.

Decade of the 1930s saw the Great Depression in the United States and many other countries. During this decade large numbers of people lived in poverty, desperately in need of more food, clothing, and shelter. Yet the resources that could produce that food, clothing, and shelter were sitting idle, producing nothing. In America People from all over the country stood in lines to get bread or eat at free soup kitchens. I

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The unemployment rate in America in the 1933s.

The unemployment rate measures the number of people who are looking for work and can't find a job. In 1933, unemployment climbed to 25%. One out of every five people looking for work couldn't get a job – and the percentage only accounted for those who were still looking. The unemployment rate did not count the thousands of people who gave up trying to find a job. If this was so bad then and after two generations have been born since that time.

 It means that there are triples times that population on the earth today. Therefore a larger population would be without work. Great nations are crying out for daily bankruptcy. Japan the world’s second largest economy, Japan took a bailout in late 2008 and yet it wasn’t enough another one is need to boost their economy. China one of the largest manufacturing nations has been closing down factories on a daily business. Which has already caused millions to lose their jobs.

What are foreclosures?

Banks use foreclosures as a legal way to retain money they loan out when payments cannot be made by the borrower. Back in the 20s farmers and other people borrowed money to cultivate, buy land, machinery, start businesses and build homes. Being that it was a loan they took out they would make a pledge that the land would stand security if they cannot pay their loans.

However this was a wise decision but yet not so wise, because if something like this should happen that your land should be seized back, you would have no land, no business and no home.

 Many families lose their homes and lands; they were actually thrown off the land. This was in order to for the bank to sell these assets that they claimed back to get back their monies to run the bank. In all this the bank still didn’t made the money they wanted when they sell back the land, because the stock market crashed and fewer people had money to purchase land. The value of land had plunged very low.

List of Banks that failed in the 1930’s

List of Banks that has failed and is failing in this 21^st century

Would Mr. George Bush’s bailout plan work and for how long?

On Friday October 3^rd when Bush’s $700 billion bailout plan was approved by the Congress. This did not help the economy as he taught America would be back on her feet running. Credit markets have worsened; the stock market also plummeted to nearly ten-year lows.

America is trying very hard not to enter into a depression, That’s exactly where they are heading it’s pretty risky for the whole world. Congress said that the bailout supporters had to do something to unfreeze the credit markets. It didn’t work.

A lot of people around the world think’s that this economic downturn, which is originally designated a recession some time in the near future – is the result of the financial crisis. This is absolutely not correct. This current recession is the main result of a collapsing housing bubble. This bubble of more than $ 8 trillion dollars accumulated between the 1996- 2006, and it is only about 60 percent deflated so far. This means that even if all the problems in the financial system were miraculously solve tomorrow, the United States would still be facing a serious recession. This means that all other countries would be part and parcel of USA recession. The financial crisis would only add fuel to the fire, financial institutions would cut back on lending and short term interest rates for commercial borrowing would rise.

The bailout out package would serve little or no purpose it’s an inefficient and ineffective way of dealing with bank issues of holding bad debt. This would enable the U.S. Treasury Department to purchase up “troubled assets” mostly mortgage- related securities from financial institutions, at prices that will likely be much higher than they are worth.