Generally, in any expanding and fast-growing economy, after an initial growth phase of six to ten years, it is followed by a slowdown or a recession for a minimum of six months to a maximum of two years. This is the normal cycle that any growing market follows in a normal and regular economy. The recession is an unfortunate occurrence and it still pretty fresh in the mind of the people all around the world. Unfortunately, mistakes of a similar nature were made time and again and this repeat performance has again resulted in a scary and terrifying financial crisis all over again.
Nearly eighty years ago, towards the end of the year 1929, a series of events occurred in the United States that resulted in disastrous consequences. It gained notoriety as the 'Great Depression' and to this day people still shudder at the thought of what the world faced in terms of the deflation, poverty and unemployment that it triggered off nearly a century ago. The debilitating phase lasted for close to a decade. The banking system collapsed in the year 1932. There was absolutely no free currency available in the market for any activity that would spell a positive change in the market trends. People held onto whatever cash they had as the price of goods were falling and a number of essential goods and commodities could be bought at the lowest imaginable cost. It was precisely at this time that President Roosevelt stepped into the picture with his New Deal programs to increase the opportunities for employment and increase liquidity. A number of government-led initiatives began to better the troublesome situation.
Since the end of the Second World War, the United States has suffered nearly ten recessions. However, it is puzzling to learn that we have once again caught ourselves in a treacherous bog that closely resembles the situation described above, once again in the twenty first century.
To quote a few numbers now, the Commerce Department reported that there was a deficit on international trade in goods and services last year to the tune of $677.1 billion compared to $700.3 billion in the year just before that. As consumers began to spend lesser and lesser and this in turn dwindled the growth of the market and resulted in the slowdown of the economy, the deficit in the trade was relatively smaller in the year 2008. Deregulation resulted in trade deficits and contributed to them in a direct as well as an indirect manner. Until and unless appropriate laws are established to control this kind of unprecedented trade volume, the economy cannot be and will not be restored to normalcy in the future.
Last year, a $144.1 billion surplus was recorded for trade in services in the United States compared to an $821.2 billion deficit on trade in goods. $293.2 billion was the deficit on petroleum products in the year 2007, while last year it went up to $386.3 billion. The overall volume of import of petroleum products fell by an astonishing four percent in a single year.
Ian McCafferty, CBI chief economic adviser says, "Given the rapid contraction in global economic activity and the continuing credit squeeze, we believe the UK will be mired in a deep recession for the whole of 2009, lasting six quarters in total and accompanied by a significant rise in unemployment." It is shocking to know