# What happens in a recession?



## Killme00 (8 Feb 2008)

What steps can we take to protect ourselves from a recession? 
How big an impact would a US Recession have on the Irish Economy? 


Are there any self sufficent economies in the world? Is there a model for a recession proof economy? Should we be willing to offset large profits in lieu of future stability and less profits?


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## Caveat (8 Feb 2008)

Killme00 said:


> Are there any self sufficent economies in the world?




The king of Thailand is passionate about this - but self sufficient in Thai terms is probably not what you're talking about.

The Swiss seem to be pretty insulated though.




> Should we be willing to offset large profits in lieu of future stability and less profits?


 
Should or would? I think people are inherently too greedy to think like this except when it's too late.


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## coola (8 Feb 2008)

you ask a lot of questions. 

in my opinion ireland is very dependent on the world economy for exports and trade. if there is a recession stateside then cutbacks will be made and redundancies will occur in ireland.

ireland is now a rich economy but not due to domestic demand, its all export driven. the US companies will cut back where its cheapest to cut back (in the US) first but if the recession is severe then we WILL be affected. 

best advice is to work for an irish company with a good history and one thats not too reliant on economic cycles or get a job with the civil service !!!


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## theoneill (8 Feb 2008)

I have always kept a minimum savings cushion of at least 4 months, which is exclusive of pensions.
Watch you spending and identify the difference between need and want.

If the US economy goes into a deep and prolonged recession I’m afraid very few of us will be insulated from it unless you work for the public sector.


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## Killme00 (8 Feb 2008)

theoneill said:


> identify the difference between need and want.


 
Good advice. I think we as a society have been making this decision badly for a few years.

Why are the swiss more or less insulated from econic turmoil, whats different about their economy?


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## ClubMan (8 Feb 2008)

Killme00 said:


> Why are the swiss more or less insulated from econic turmoil, whats different about their economy?


Maybe they drive something smaller?


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## Caveat (8 Feb 2008)

Killme00 said:


> Why are the swiss more or less insulated from econic turmoil, whats different about their economy?


 
Have a look here for general wiki view.

The US are an important trade partner for the Swiss and whilst US recession has affected the country, and no doubt will again, the impact usually seems to be considerably less for Switzerland than for the rest of Europe.


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## z103 (8 Feb 2008)

We should consider embracing Juche, to become self sufficient.


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## teachai (8 Feb 2008)

I think we need to define a recession. I seem to recall, the official definition is two successive quarters of negative economic growth. 

What we are seeing at the moment is reduced growth, which is technically not a recession


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## theoneill (8 Feb 2008)

teachai said:


> I think we need to define a recession. I seem to recall, the official definition is two successive quarters of negative economic growth.
> 
> What we are seeing at the moment is reduced growth, which is technically not a recession




Good point but reduced growth doesn't sell as many papers as recession


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## Caveat (8 Feb 2008)

teachai said:


> I think we need to define a recession. I seem to recall, the official definition is two successive quarters of negative economic growth


 
I think, specifically, it's 2 or more successive quarters of reduced GDP.


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## casiopea (8 Feb 2008)

Killme00 said:


> Good advice. I think we as a society have been making this decision badly for a few years.
> 
> Why are the swiss more or less insulated from econic turmoil, whats different about their economy?



I believe they suffered a "down turn" in the early 80s in the property market - certainly at least when we were buying here that was referred to many times.  

As a nation they are very cautious and seem to want to avoid booms as much as down turns (lay man opinion/observation no links to support that statement just my 2c from living here).  

Buying a house here was so interesting in comparison to home.  
Its very hard to get a mortgage here without a minimum of 15% deposit - indeed they prefer 20%.   It means that buyers here are normally in their late 30s/early 40s at the earliest - the FTB market is substantially smaller than home.  It also means that  prices arent pushed up with haggling (as the bank will only lend you 80% of what the bank perceives the value of the house to be regardless of what you have agreed to pay). There are far less packages (ie no saving account mortgage etc). The meetings with the bank were a lot more formal - at home it nearly feels like a mortgage is ordered over the counter - here we'd 5 formal meetings with 2 bank managers (and we were given a gift by the bank manager on closure of the mortgage). The mortgage term is so much shorter (circa 5 years), at that point we have to remortgage and be re-evaluated again. At home I can get a 30 year mortgage for a large amount and probably never be challenged again (assuming I make repayments).

Its very clear from living here that theyve heavily invested in their infrastructure (roads, farming, tourism).

A bit of a waffley post - and very much a reflection of my experience as oppose to a formal economic review.


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## ClubMan (8 Feb 2008)

teachai said:


> I think we need to define a recession. I seem to recall, the official definition is two successive quarters of negative economic growth.
> 
> What we are seeing at the moment is reduced growth, which is technically not a recession





Caveat said:


> I think, specifically, it's 2 or more successive quarters of reduced GDP.


Wikipedia - Recession


> In macroeconomics, a *recession* is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.


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## joejoe (9 Feb 2008)

ClubMan said:


> Wikipedia - Recession


 
So with that, are we in a recesson? or soon to be?

Joejoe


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## GOBSTOPPER (9 Feb 2008)

Originally Posted by *Killme00* http://www.askaboutmoney.com/showthread.php?p=573612#post573612 
_Why are the swiss more or less insulated from econic turmoil, whats different about their economy?_


_Because they are the bankers to the worlds drug lords,despots,terrorists,etc.etc. their whole society is built on other peoples misery IMO .Shame on the Swiss !_


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## askU (13 Feb 2008)

Perhaps the most important element of the debate on whether the  US is or is not heading for  recession is whether or not US consumer spending is headed for  its first quarterly decline since the early 1990s.


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## murphaph (18 Mar 2008)

GOBSTOPPER said:


> _Because they are the bankers to the worlds drug lords,despots,terrorists,etc.etc. their whole society is built on other peoples misery IMO_


_
....but shouldn't we be looking for a piece of this lucrative action? the IFSC is clearly not pulling in enough wealth for us! lol.

Does anyone else feel that recessions are too easily talked up? Newspapers exaggerate everything to sell themselves but joe public may well believe all of it and change their spending habits....thus leading to real recession. 

It would be nice (IMO) for the US economy to have less global impact. Does anyone think this is beginning to happen? Or do you still firmly believe the adage that the US economy sneezes and the world catches cold?_


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## z109 (18 Mar 2008)

murphaph said:


> Does anyone else feel that recessions are too easily talked up?


No.

You are deluding yourself if you believe that it is possible to talk up a recession. It is not possible to talk up economic growth either.


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## demoivre (18 Mar 2008)

yoganmahew said:


> No.
> 
> You are deluding yourself if you believe that it is possible to talk up a recession. It is not possible to talk up economic growth either.



What, consumer confidence and consumption expenditure aren't correlated?


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## z109 (18 Mar 2008)

demoivre said:


> What, consumer confidence and consumption expenditure aren't correlated?


No, talking about a recession and consumer confidence aren't related.

Consumer confidence is related to income and expenditure.

Recession talk makes people examine their income prospects and their expenditures in a new light.


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## demoivre (18 Mar 2008)

yoganmahew said:


> No, talking about a recession and consumer confidence aren't related.



I disagree . Consumer confidence is affected by current as well as future economic prospects. The latest IIB/ESRI Consumer sentiment index showed a decline because of  consumers becoming more negative in their outlook for the labour market and the overall economy, according to the authors.



> Consumer confidence is related to income and expenditure



More importantly consumer confidence is affected by future income flows, which in turn, for many people, will depend on the state of the economy.



> Recession talk makes people examine their income prospects and their expenditures in a new light.



True. Their *confidence* in their future income streams will be called in to question when there is talk of a recession.


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## murphaph (18 Mar 2008)

yoganmahew said:


> No, talking about a recession and consumer confidence aren't related.
> 
> Consumer confidence is related to income and expenditure.
> 
> Recession talk makes people examine their income prospects and their expenditures in a new light.


I think you're contradicting yourself there somewhat. If people re-evaluate their spending based on a perception that the economy (nd hence their job) is at risk, they will (if they are acting rationally) reel in their spending and hold money out of circulation in their bank or under their mattress! 

If enough consumers stop spending money, the economy slows.


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## demoivre (18 Mar 2008)

murphaph said:


> If enough consumers stop spending money, the economy slows.



Therein lies the problem as around 60% of GDP is consumption expenditure - less demand for goods and services leads to less demand for  labour, which is derived form the demand for  those goods and services.


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## Afuera (18 Mar 2008)

murphaph said:


> If people re-evaluate their spending based on a perception that the economy (nd hence their job) is at risk, they will (if they are acting rationally) reel in their spending and hold money out of circulation in their bank or under their mattress!


Surely it will only have an impact if the negative perception matches the reality though?

If I'm earning a decent wage and have lots of work lined up to keep me busy for the next few years then why would I have to reel in my spending? On the other hand, if I notice that my employer is not hiring any more people and is trying to introduce a pay freeze, it would be foolish not to take notice.

I don't think you can ever seriously argue that simply talking about a recession is enough to make people stock up on the tinned cans and dive into their bunkers.


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## gurramok (21 Mar 2008)

Think the Irish economy _maybe_ in recession already.
[broken link removed]

2.2% decline in GNP in Q4 '07 from Q3 '07 is bad.

We just have to wait for Q1 '08 stats out in June to confirm if the R word is here.


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## z109 (21 Mar 2008)

The point I am making, as Afuera alludes to, is that recession talk does not cause recessionary conditions, it is the result of them.

If you see your income being squeezed in the future, the response is to cut spending and write down debt. Companies do this first, their employees see the way the wind is blowing and follow suit.

Purchasing managers sentiment is a leading indicator, as it shows what business is forecasting in the short term, based on future orders. Consumer sentiment is a lagging indicator as the consumer is the last to know!

This idea that  it is possible to "talk down the economy" is nonsense. If that was the case, there would have been a recession here post-9/11 when the US went into recession and there was lots of talk of the EOTWAWKI. It didn't happen because:
a) the economic fundamentals were strong
b) easy credit allowed consumer debt spending to rocket


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## MOB (21 Mar 2008)

".......the impact usually seems to be considerably less for Switzerland than for the rest of Europe."

I have read somewhere (but have not seen any data to back up the assertion) that the Swiss have an economic safety valve in the form of a reasonably large population of immigrant workers, that the immigrants do not integrate to any great extent and that in times of recession, the Swiss have been able to simply boot them out.

To some extent, perhaps we have the same thing now: not because we will boot people out, but simply because they will leave for their own countries (or to wherever the work is - pre-Olympics London perhaps) if there is a serious downturn.


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## room305 (21 Mar 2008)

MOB said:


> I have read somewhere (but have not seen any data to back up the assertion) that the Swiss have an economic safety valve in the form of a reasonably large population of immigrant workers, that the immigrants do not integrate to any great extent and that in times of recession, the Swiss have been able to simply boot them out.
> 
> To some extent, perhaps we have the same thing now: not because we will boot people out, but simply because they will leave for their own countries (or to wherever the work is - pre-Olympics London perhaps) if there is a serious downturn.


 
I'd say this assertion about the Swiss is rather dubious as it gives weight to the lump of labour fallacy.

I don't see how foreign workers in Ireland leaving in their droves is going to help those who remain to pay back debts they owe. Nor will it do anything about uncompetitive labour markets, a bloated public sector, powerful trade unions, a weak government, a strong Euro and more than three hundred thousand empty houses.


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