The Role of Banks in Economic Recessions
The role of banks in economic recessions
05.05.2009 In today’s wavering global economic context, the word `crisis` is omnipresent, taking the media by assault and infringing into the population’s daily life, although many countries haven’t even officially entered recession yet. Although recession is generally referred to as a negative Gross Domestic Product growth for a period of at least two consecutive quarters, other important economic change variables, such as current national unemployment rates, consumer confidence, capacity utilization, spending levels and business profits must be taken into account when defining a recession and its attributes. Therefore, recession can be seen as a general slowdown in economic activity in a country over a sustained period of time, or a business cycle contraction (which normally follows an economic boom). Raging from “The panic of 1797” (the first US recession, caused by the deflating effects of the Bank of England as they crossed the Ocean to American soil), reaching their climax at the beginning of the Great Depression, in the 1920s and 1930s, and continuing with the ongoing financial crisis led worldwide craze (considered to be the most serious crisis since the Great Depression), economic recessions have occurred all throughout the history of modern economics. While many mainstream specialists argue that they are part of the natural cycle of the economic system and must be seen this way, Marxists call it an inevitable part of capitalism. As far as the causes of recessions are concerned, it is believed that they are primarily generated by inadequate aggregate demand in the economy, as a result of the actions taken to control the money supply, combined with external economic shocks and the unwinding of major imbalances in the economy. Over the ages, banks, as major financial institutions, have played an important part in the emergence and evolution of
05.05.2009 In today’s wavering global economic context, the word `crisis` is omnipresent, taking the media by assault and infringing into the population’s daily life, although many countries haven’t even officially entered recession yet. Although recession is generally referred to as a negative Gross Domestic Product growth for a period of at least two consecutive quarters, other important economic change variables, such as current national unemployment rates, consumer confidence, capacity utilization, spending levels and business profits must be taken into account when defining a recession and its attributes. Therefore, recession can be seen as a general slowdown in economic activity in a country over a sustained period of time, or a business cycle contraction (which normally follows an economic boom). Raging from “The panic of 1797” (the first US recession, caused by the deflating effects of the Bank of England as they crossed the Ocean to American soil), reaching their climax at the beginning of the Great Depression, in the 1920s and 1930s, and continuing with the ongoing financial crisis led worldwide craze (considered to be the most serious crisis since the Great Depression), economic recessions have occurred all throughout the history of modern economics. While many mainstream specialists argue that they are part of the natural cycle of the economic system and must be seen this way, Marxists call it an inevitable part of capitalism. As far as the causes of recessions are concerned, it is believed that they are primarily generated by inadequate aggregate demand in the economy, as a result of the actions taken to control the money supply, combined with external economic shocks and the unwinding of major imbalances in the economy. Over the ages, banks, as major financial institutions, have played an important part in the emergence and evolution of
Bibliography: 1. http://www.worldwatch.org/node/5978 2. http://recession.org/library 3. http://useconomy.about.com/od/grossdomesticproduct/f/Recession.htm 4. http://mises.org/daily/1566 5. http://www.discusseconomics.com/global-economics/the-role-of-bank-managers-in-the-world-financial-crisis/ 6. http://fpc.state.gov/documents/organization/7962.pdf