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Eureka: Different causes for economic recessions
by Joseph Gatt
2018-06-14 08:20:51
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Economic recessions are caused mainly by five different factors: security factors, environmental factors, political factors, social factors and economic factors. In some cases one single factor is the main contributor to the recession, while in other cases there's an overlap of factors causing economic recessions.

Security factors: If the streets are no longer safe, housholds stop consuming, corporations stop making profits, the financial market loses investments and the government no longer receives funds. Security factors in recessions can include the rule or armed gangs or terrorists, wars with other nations or civil wars, or a climate of lack of security within any given region. A lot of funds have to be mobilized for fighting security, and the economy stops moving.

recess0001_400Environmental factors: natural disasters can cause an economy to come to a standstill. Housholds stop consuming, corporations stop making funds and can't repay their debts, have to fire workers meaning households can't repay their debts, the financial market suffers and the government lacks funds. Natural disasters cause people to lose their homes, infrastructure to crumble and makes transportation difficult, further exacerbating the recessioon.

Political factors: When politicians legislate without thinking too hard or consulting with relevant parties, that can cause recessions. Politicians legislate on household finances, on corporate finances, on the financial market or on the government budget. In some cases it can be raising or lowering interest rates, in other cases it can be debt-led growth, or in other cases it can be legislation that prevents households from bringing in income, corporations from dealing with clients or bringing in income, the financial market from receiving investments and making loans, or the government to have a tight grip on the economy.

Social factors: Different social factors contributing to recessions include households who refuse to bring income in, either because of addiction problems or because of idleness or other factors, corporations that behave in strange ways that prevent them from bringing income in, such as being confrontational with households or client. Or if the financial market that behaves in socially strange ways such as dealing with gangs or breaking social or legal conventions, or the government that breaks social and legal conventions. That is, when people don't follow social or legal norms, you could get recessions.

Economic factors: I have discussed these at length in a previous fireside chat. Households have too much debt which prevents them from consuming, leading coporations to lose consumers and be unable to repay their debt, leading the financial market to lose money, leading to government to lose money.

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