what is the main cause of recession in present time?
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Answer Posted / kumar abhinav
It all started from the USA sub- prime (housing loan )
crisis.The USA banks n financial institutions went on
lending for housing construction n buying without looking
to the re paying capacity of the borrowers.As the
properties were mortgaged with them,they thought to re
possess the house in case of default n sell them in the
market as there was huge demand.The demand started
falling .There was default n re possession.The properties
could not be sold as there was no demand.The banks which
invested huge amount on properties,felt the pinch.Many of
them went bankrupt.The whole financial system of USA was in
turmoil.
Because of the financial turmoil,the financial institutions
could not provide the required loan to the industrial
sector.Want of finance forced industries to cut production
n jobs.The economy in general was affected ,due to falling
production,employment n purchasing power of the people.The
USA was in economic recession.
The USA is the richest economy of the world.Many countries
of the world,depend on it for business.As USA was under the
grips of recession ,it could not do the volume of
business,it used to do with other countries.This adversely
affected,the business of other countries of the world
including India.
USA made the huge investment ,in other countries of the
world including India.To meet its domestic demand it
started withdrawing funds from other countries ,where it
made investment.The partially complete projects with USA
assistance remain incomplete due to want of funds.
These developments adversely affected the industrial sector
of the entire world including India.The industries started
cutting production n jobs.Thus,the entire world came under
the grips of economic recession.
So,the small fire which started in USA started taking the
form of a huge fire n captured the entire world n the
result is global recession n financial turmoil.
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