Economic Recession: Is the Worst Over?

Do the recent figures showing a decline in the unemployment rate, spell good news?
According to the Nobel Laureate Paul Krugman, not just yet.

He said in a statement recently that we have just narrowly avoided running into a great depression like situation for the second time. It is definitely due to the spending schemes and policy changes incorporated by the government that we have escaped such a devastating state.

As most of us know, the great depression of the 1930s went on for almost 10 years, coming to an end only due to the 2nd world war. The great depression was truly a period of utter despair. It all started in a way similar to what happened this time too. It all began with a huge tumble in the stock markets on the 29th of October 1929, a day labelled as the ‘Black Tuesday’. Trade then took a downward spiral, so did other factors like the per capita income, prices and profits. The Second World War acted as an investment initiative, causing the governments to spend exceedingly. This increased the circulation of money in the economy, bringing it out of the devastating state.

History repeats itself and so it has even this day. But we have narrowly escaped the fate that our fore fathers had succumbed to.

Paul Krugman maintains that though there are signs that the recessional period is coming to an end, and that things are definitely looking better than they had been in the past 15 months, we still have a long way to go. He says that this is not going to be a ‘phoenix’ like rise in any way. The unemployment rate has been the lowest this month, and only 2, 47,000 workers lost their jobs this month, in comparison with the 4, 43,000 in June. Of course, this is not the picture of complete stability, but it is clear that we’re edging our way towards stability. Also the wages have increased for the first time in the past 15 months.

Of course it is now almost certain that the economy is moving upwards, a complete recovery will take a minimum of two years for sure. It has definitely stabilised for now, but for it to be back from where it tumbled will definitely take a while. The fall has taken a while, and hence so shall the rise. There have been times in the past like the recessional period of Asia in 97-98, when the fall and rise, happened almost one after the other in immediate succession.

It is also foreseen that the Asian countries will recover faster than USA or the European countries. President Barack Obama says that notable changes will begin to appear when he has put into action his $787bn ‘stimulant package of tax cuts and increased government expenditure’, which will be put to action in 2010.
The clouds are parting, and the sun is beginning to appear, but it will take a while.

Trikala Satya

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