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All the experts from World Bank to Raghuram Rajan are saying that a recession coming is possible. Recession news has worried everyone but this begs the question – what is a recession? In this video, I tried to explain the recession in simple terms. Recession explained in simple terms is to make you understand economic fundamentals easily and explain to other people as well.

Here’s the analogy I used to tell you what is recession – If there is a food truck owner who wants to earn profits from their food business. The business owners aim to grow their business and possibly buy another food truck by using the rewards from the current business. In a normal economic situation, this will surely happen. This happens because of regular, irregular, and new customers coming to the truck daily. The efficiency of the food truck will also increase. The food truck’s quality of food will also improve. If there are 200 people paying 200 rupees, then the food truck will be generating a profit of ₹40,000 every day.

But this isn’t enough amount to buy another food truck. So, the food truck owner goes to a bank to raise some loans to buy another food truck. This is how our economy works – we can replace the food truck with any company like Amazon, Google, FB, and so on. Under extraordinary situations like war, famine, pandemic, or a banking system collapse, these institutions like governments, companies, and food trucks don’t grow. Because of this their overall production and income drop. This is because people would want to hoard money instead of spending it since there is too much fear.

The history of recessions tells us that – the last 3 global recessions were in 1990, 2008, and 2020. The 1990 recession was because of the gulf war, the 2008 recession was because of the housing crisis and subsequent banking crisis, and the 2020 recession was because of the novel covid-19 pandemic. In 2023, we are looking at all of these 3 things together. All these 3 things are impacting the global markets together right now.

In March 2020, the pandemic kicked in and many people lost their jobs. In the US, the unemployment rate shot up to 13% in April, May, and June of 2020. Right now the unemployment rate is 3-4%. The government of the US deposited money into people’s bank accounts to keep the economy going. Because of this, the food truck owners didn’t have to shut their businesses. And subsequently the people around also had money to buy more stuff. Because of this businesses prospered and hired more people, making the economy function again properly.

The excess money pumped into the system made the prices rise. But around the same time, Russia Ukraine war started. The two aspects of it are the oil coming out of Russia and food grains coming out of Ukraine. Because of this, the production and operating costs of the food truck owner increased. Because of this the prices of the end product that is meals also increased – causing inflation.

But Governments intervened right away to control inflation by raising interest rates. It was done to minimize the effect of inflation on the poorest of the poor in the country. But this led to the third trigger – Banking Crisis. The interest rate increase resulted in higher cost of loans (increased EMIs) for consumers and businesses alike – which led to stopping them from spending extra money on goods they didn’t need. The interest rate in the US has increased in the US by 400 basis points in the last year. Customers take out money from the banks and invest it in government bonds – taking money out of the economy. This will cause a credit crunch. I’ve explained way forward and the takeaways from this entire situation at the end of this video.

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Chapters

0:00 – Intro
1:08 – Pointers
1:23 – What is Recession
3:54 – History of Recession
4:42 – Pandemic
6:19 – War
8:28 – Banking Crisis
11:10 – Way Forward & Takeaways
13:52 – Outro…(read more)

BREAKING: Recession News

LEARN MORE ABOUT: Bank Failures

REVEALED: Best Investment During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

Special Episode: Recession 2023 Explained | Global Recession 2023 Coming | Recession Explained in English

The world is currently facing numerous challenges, and one of the most imminent ones is the looming global recession of 2023. This potential economic downturn has experts and economists concerned, as its widespread effects can impact individuals, businesses, and entire countries.

A recession occurs when the economy experiences a significant decline in its overall production, commonly measured by the gross domestic product (GDP). This decline leads to a decrease in spending, investment, and employment, ultimately affecting the standard of living for many. While recessions are cyclical and not uncommon, the global recession of 2023 is worrisome due to its potential severity and magnitude.

There are various factors contributing to the possible recession. One major cause is the ongoing COVID-19 pandemic. The pandemic has resulted in significant disruptions across various industries, with travel, hospitality, and retail being the hardest-hit sectors. The subsequent lockdowns, reduced consumer spending, and supply chain challenges have all contributed to economic instability.

Additionally, the pandemic’s impact on global trade and supply chains has been immense. Countries dependent on specific industries or reliant on exports, such as manufacturing nations, have experienced substantial setbacks. The disruption of global supply chains has led to shortages, higher prices, and reduced productivity, further exacerbating the economic situation.

Another factor is the growing debt burden faced by many countries. Governments have had to inject massive amounts of funds into their economies to counter the pandemic’s effects, resulting in record-breaking deficits and soaring levels of public debt. The prolonged effect of this debt may limit governments’ ability to respond to future economic crises effectively.

Moreover, geopolitical tensions and conflicts around the world have contributed to the uncertainty surrounding the global economy. Trade disputes between major economies, such as the United States and China, have resulted in trade barriers and tariffs, hindering global economic growth. Political instability in various regions can cause investors to pull out their funds, exacerbating the economic downturn.

In response to the potential recession, governments must implement appropriate fiscal and monetary policies. These policies may include measures such as lowering interest rates to encourage borrowing and investment, increasing government spending to stimulate economic activity, and providing support and assistance to struggling industries.

Additionally, governments and international organizations must work together to address global challenges collectively. Cooperation in vaccine distribution, financial aid, and trade policies can help stabilize the global economy and mitigate the effects of the recession.

For individuals, it is essential to be financially prepared for potential challenges. Saving money, reducing debt, and diversifying investments can help individuals weather economic uncertainties. Staying informed about current economic trends and seeking professional financial advice can provide guidance during these uncertain times.

While the prospect of a global recession in 2023 is concerning, it is essential to remember that the global economy has shown resilience in the past. By implementing appropriate measures and fostering international cooperation, it is possible to mitigate the impact of the recession and lay the foundation for a strong recovery.

In conclusion, the global recession of 2023 is a significant concern for individuals, businesses, and countries worldwide. Various factors such as the COVID-19 pandemic, debt burdens, and geopolitical tensions contribute to this potential economic downturn. However, through effective government policies, international cooperation, and individual financial preparedness, we can navigate these challenging times and pave the way for a brighter economic future.