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Recessions: 10 Facts You Must Know

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https://www.kiplinger.com/slideshow/investing/T038-S001-recessions-10-facts-you-must-know/index.html

kiplinger.com

Recessions: 10 Facts You Must Know
America officially fell into recession territory in February 2020. Here's everything you need to know when it comes to these economic downturns.

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Understanding recessions are vital

Understanding recessions are vital

Recessions are part of the fabric of a dynamic economy. The average investor fears recessions because they mean lower home prices, lower stock prices, and less or no work.

Several things ca...

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Naming a recession

Recessions are really "depressions," but the term "depression" seems too terrifying. After the Great Depression, economists began to use the word "recession" instead.

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An official recession

A standard measurement for a recession is two-quarters of consecutive GDP contraction. But the official arbiter of recessions and recoveries, the Business Cycle Dating Committee of...

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Time-frame of a typical recession

The average length of recessions is 17.5 months. The long-term average covers the 1873 recession that lasted 65 months. It also includes the Great Depression, which lasted 43 months.

...

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Recurrence of recessions

Since 1857, a recession occurred about every three-and-a-quarter years. The government used to think recessions should work themselves out.

Since WWII, the average between recessions is nea...

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The harshest recession

The recession of 1873 was known as the Great Depression until the 1929 recession started.

The recession of 1873 started with the failure of Jay Cooke & Company, a major bank. It caused ...

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The worst effect of a recession

Losing your primary source of income is the worst effect since jobs are increasingly hard to find in a recession.

That is why it's essential to have a few months' salary in cash as ...

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The best time to buy stocks

Historically, the best time to buy stocks is when the NBER announces the start of a recession.

The NBER takes at least six months to determine if a recession has started. The average post-W...

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Spending your money

The best thing to do with your money during a recession is to pay off your credit card debt.

Paying off a credit card that charges 18% interest is equivalent to getting an 18% return on inves...

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Early warning signs of a recession

An inverted yield curve is a more solid predictor of economic downturns than the stock market, consumer confidence, or leading economic indicators index.

An inverted yield curve is when sho...

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The Federal Reserve

The Federal Reserve does not want to start a recession because part of its dual mandate is to keep the economy healthy. But, the Fed's dual mandate also includes keeping inflation low. A cure f...

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SIMILAR ARTICLES & IDEAS:

A shift in measuring well-being

A shift in measuring well-being

People in societies such as ancient Greece, imperial China, Medieval Europe, and colonial America did not measure people's well-being in terms of monetary earnings or economic output.

Measuring well-being: people vs money

The turn toward financial statistics means that instead of considering how economic developments could meet our needs, it instead is to determine whether individuals are meeting the demand of the economy.

Until the 1850s, social measurement in 19th-century America was a collection of social indicators known as "moral statistics," which focused on the physical, social, spiritual, and mental conditions of the people. Human beings were at the center, not dollars and cents.

Measuring progress and prosperity

What led to the pricing of progress in the mid-19th century was capitalism.

Capitalism is not just the existence of markets. It is also capitalised investment, where elements of society and life - including natural resources, technological discoveries, works of art, urban spaces, educational institutions, and people - are changed or "capitalised" into income-generating assets that are valued by their ability to make money and yield future returns.

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The Great Depression

The Great Depression

.. was a devastating economic collapse which started in the US in 1929, lasting a decade. Europe was already struggling post the WWI recession, while the US was thriving. As borrowings and stoc...

Wall Street Down

On 29th October 1929, the infamous crash of Wall Street happened, where 30 million dollars were lost in a week, leading to customers rushing to withdraw their money, known as the ‘bank run’.

The entire world felt the capitalistic fall and realized that a boom leads to a bust, eventually. The disastrous effects felt around the world showed how economically interconnected the world had become.

A New Deal

In 1933, then-President Franklin Roosevelt promoted his recovery path of Relief, Recovery and Reform, to give shape to the slow and arduous reform process that will take decades.

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Seeing Isn’t Believing

Most of us have heard stories of hardships and catastrophic events of the past, like the great depression, or the dot-com bust, but haven’t lived through it, and not experienced the real pain of th...

Blind Spots

In the world of investing, having gone through a traumatic experience first-hand makes the difference between a cautious investor and a blind one. The scarred investor cannot think in the way the fresher, who hasn’t experienced the turmoil can. 

Our unique experiences impact our vision in ways we cannot comprehend on the surface.

Learning From The Past

Different generations have different investment risk appetites, with the younger generation wanting to take bigger risks and going into uncharted waters without any experience.

The New Generation, who hasn’t experienced turmoil and loss, are good at getting rich. However, the older, scarred generation is good at staying rich due to their general pessimism and conservatism. There is a need to balance the two aspects while taking an investment decision. People with different experiences aren’t necessarily smarter than others but just have a different worldview.

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