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GDP during a crisis
- A drop in GDP was expected during the 2020 lockdown. Shops and businesses were closed, and the total value produced by goods and services decreased. In turn, this affected the staff of those businesses earning less money.
- Furloughs. At its peak, about nine million people in the UK were paid a furlough - the government paid 80% of their salaries, and the employer could choose to top up the rest. Other countries have similar state-backed furlough schemes. These schemes will be coming to an end, and employers will have to decide if they have to lay off employees permanently.
- The losses are not yet crystalising. People are taking mortgage and credit holidays. It means the losses are pushed further down the road. The financial sector bubble will burst, and we will see real turmoil again.
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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 can cause, or worsen, a recession — soaring interest rates, or ill-conceived legislation. If you unders...
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