Friday, July 17, 2015

What Causes a Recession?

A nice summary video from We the Economy
Ep. 9: RECESSION | Lee Hirsch from We The Economy on Vimeo.

17 comments:

  1. During a normal economy "hope and fear battle each other for the hearts of men." Banks loan out funds at low interest rates which incentivizes buying. But when fear wins out you are a left with a recession. When people are afraid of the future they will decrease spending, which causes firms to decrease production and unemployment increases. Fortunately a recession cannot last forever and a period of expansion brings new jobs and a growing economy.
    I found it interesting the way they chose to display this lesson because it uses the human body, and humans make up the economy; with out people there would be no economy.

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  2. Like Kari, I also found the way they enacted recessions very interesting. Recessions can be caused by external factors like natural disasters, but recessions can also be caused by the actions of humans and their decisions made within the economy. I think that this is one of the most important takeaways from this video. Humans have the power to cause a recession and end a recession as shown in the video. Fear keeps consumers from spending money and makes producers create less and layoff workers. But confidence that the economy can get better and government intervention can help reduce the length of a recession.

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  3. i liked the way the this video choose to represent the recessions, making humans act out what the cause was a good way to bring the video together. although a question i have is what is the most common reason for a recession, is it the disaster effect that causes more recessions or is it mistakes in the decisions made with money. the video made it seem like disasters play more of a role, but a question that i have is that are recessions ever going to be a thing of the past?

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  4. Besides reminding me about my Catholic middle school reenactments of the Passion of Christ, this video reminded me distinctly about the Dust Bowl in the mid- to late-1930s. A drought came at the worst possible time, in the Great Depression, and wrecked havoc on the prairie agricultural economy. This likely led to a worsening of the Depression because of the tens of thousands of farmers unemployed due to terrible agricultural conditions, thereby seeking more services from the already-strained government.

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  5. This video lead me to explore what the root causes of the 08' recession were, which we are currently sliding out of by the seat our pants. http://www.investopedia.com/features/crashes/crashes9.asp credited the recession to the burst of the housing bubble, dissolving the value of mortgage backed security and the subsequent credit crisis. This, along with sleazy investment practices of the nations major banks (AIG, Bank of American, Chase) and banks giving out subprime mortgage loans to anyone who couldn't afford a house but wanted one anyway, seemed to catapult our nation and subsequently the rest of the world, toward recession.

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  6. Its interesting how we can almost send ourselves into recession. Confidence in the economy is such a large part of how well it does. They also showed how a recession can be caused by a natural disaster through their movements. It depicted this very well as we saw what a drought can do to a farm. This made me think about how the California drought is going to effect the economy and how it already has. There are a lot of farms that cannot water because of the limited water and therefore are not going to be able to produce and sell any of their crop.

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  7. The fact that recessions can't really be predicted and can be caused by a number of causes make them so dangerous. Living in California, there has been much talk of "Fear" because of the current drought. Agriculture in the U.S. is greatly dependent on California ability to produce crops and this drought will affect the whole nation, not just California. I really enjoyed the art form of this video and it helped to explain the general nature of recessions.

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    1. Good point. To bring up a few points from the last week, if a crop in California is a complement of a product elsewhere, the change in quantity demanded of the crop will change the demand of the product. Similarly, if it's an intermediate product, that will also affect supply.

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  8. The fact that recessions can't really be predicted and can be caused by a number of causes make them so dangerous. Living in California, there has been much talk of "Fear" because of the current drought. Agriculture in the U.S. is greatly dependent on California ability to produce crops and this drought will affect the whole nation, not just California. I really enjoyed the art form of this video and it helped to explain the general nature of recessions.

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  9. I really appreciated the confidence dance. I just found it important to note that ultimately, no matter how carefully a market is built up and maintained, it ultimately relies on human faith in it. The greatest, most necessary product could be created, and it could still fail if people get the wrong idea about it quickly (Some would cite the United States' rejection of nuclear energy as an example of this). Going back to the first blog post, this is why economics is more of an art than a science. It relies intimately on a human and unpredictable aspect of study.

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  10. I enjoyed this video because it was a very interactive way to show the cycle of a recession. One bad season for agriculture can cause a complete 180 for the economy. If people stop spending money it causes so much depression. I thought the video did a good job showing how loss of jobs can cause so much chaos. People are unable to put food on the table and care for their families which creates more fear. It seems like once some people catch a lucky break in the recession and start purchasing more then more people catch on and gain hope.

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  11. This video was interesting showing that human emotion itself causes recessions. It seems that no matter the circumstance, the effects of fear are far more dangerous than the economic downturn (like a drought) was itself. My question is, how do we avoid a recession? How do we get a nation to trust the free market to correct itself? The fear itself seems to come from both consumers and lenders, and I see it tracing back to America's tendency to crave immediacy. In an economic downturn, lenders wanting their loans paid immediately is understandable but just furthers the problem of fear and recession.

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  12. This video was interesting showing that human emotion itself causes recessions. It seems that no matter the circumstance, the effects of fear are far more dangerous than the economic downturn (like a drought) was itself. My question is, how do we avoid a recession? How do we get a nation to trust the free market to correct itself? The fear itself seems to come from both consumers and lenders, and I see it tracing back to America's tendency to crave immediacy. In an economic downturn, lenders wanting their loans paid immediately is understandable but just furthers the problem of fear and recession.

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    1. I think that's a really good question Iris. I would think that the media has a lot to do with it. So many people put their faith into what they're seeing in the newspapers and on television. They don't always know to gain information from a multitude of resources and form their own opinion, they just take the opinion that has been given to them. So I think if the news anchors are all doom and gloom and focusing on all the negative things about the economy, people are going to begin to have that fear that they talked about in the video. But if they're talking about how things are improving and going to get back to normal, people will believe that and begin to have confidence in the economy again. Now, I think this applies more to consumers and less to other entities like banks, but I do think everything somewhat comes together in the end.

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  13. I think this video really showed the humanity involved in recessions. While the economy can be viewed as numbers and figures, the usage of humans dancing/acting out the impacts of a recession (and by explaining human emotion as the driving force of recovery) really reminded the viewer of effect on human lives that economic downturns have. Ultimately, consumers drive the economy. I really appreciated John's comment about the current drought in California. The extreme environmental condition is bringing about a lot of fear and the future will hold the responses to these fears.

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  14. I thought that this video was very interesting and informative in regards to talking about a recession. It was interesting to see how fast it can come on, without notice, because of things like a natural disaster. I liked that it pointed out that a lot of a recession has to do with fear and people not wanting to trust the market or others. That's not something that's usually talked about so I found that interesting. Overall I think this video really easily sheds light on the basic points of a recession and was entertaining to watch.

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  15. I thought that this video was pretty informative and interesting. I thought it was unique that they used the actors to represent causes of recessions, such as a natural disaster in the video. It was also interesting to see how society can also play a role in the cause of a recession. For example, if people are fearful of the market, they won't spend their money or invest which stimulate the economy. And vise versa, confidence within society can cause the economy to grow at an exponential rate. It was interesting to see how society can play such a large role in the condition of the economy.

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