The recession is a bad time for traders and those interested in the stock markets. The things are not what they like. Share prices decrease, investors resist to invest in markets and the overall economy suffers too much in terms of growth as well as economic development. In result, the industries suffer and production becomes less, price increases and the customers or consumers face inflation.
Unemployment is uncontrolled and living standards of people come down radically. The consuming power of the people becomes lower as the money in their hand is less, that leads to increasing in the number of goods in the market which is left unsold. Items that are sold at low prices affect the profit. Less profit causes less money to be invested and thus the inflation increases eventually.
Slump Market Scenario while Recession
In many countries all over the world, stock market fluctuations are observed. Wall street has recorded the lows and high of many companies, and some of the high standings. Some banks such as Sachs, Bank of America, and Morgan Stanley, have suffered financial losses. Big technologies such as Fortune 500, a Golden Sachs, suffer due to slump. The slump causes serious effects on banks and on the world’s economy. The bailing off a bank means that the money of taxpayers was diverted from development.
Breaking Down Slump
A slump can be faced by an industry when overall activities made by that industry begin to decline. In a loan industry, a slump may be due to tight lending policies and rules. As it is difficult to gain a loan, the overall volume may drop. Slump also applies to financial markets. When it is experienced by stock markets, the prices and trading usually become lower.
Impact of Recession on the Economy
- Stock Prices Lower down: This means investment suffers. The production of an industry badly suffers when investors resist investing in companies that are in a loss during recessions. Big companies can withstand such setbacks, but small companies face a tough time and some of them end up with closing.
- The slump in the market: Services and Goods become difficult to sell due to a decrease in the purchasing power of consumers.
- The increase in Unemployment: The unemployment in country increases. People are thrown out of the jobs. They become unable to meet the both ends. Many of the goods and services are not within their range.
- Depression: If recession persists for a long time it causes depression. Negative trends become visible in a stock market and there is rapid unemployment. The government needs to bail out the companies. Public spending also suffers a setback.
- National debts also increase: National debt increases mean low money is spent by the government for development purpose. Money gets diverted for bailing out the companies. The recent recession of US indicates how banks are dependent upon federal aid for survival. Taxpayers’ money is spent and giving the banks a boost.
Thus, the recession is obviously bad for economic development and growth. The economy slows down. The investors hesitate to invest, and the producers are unable to sell the products. Due to unemployment, consumers face the lack of money to buy goods available to them in the market.