Economic depression is an economic concept that characterizes a period of deep recession. Among the main elements of economic recession we have mass unemployment, increase in inflation, interest rates, bankruptcy of companies and companies and other negative indices for the market.
Economic depressions are hard to come by these days, but they still loom as a threat to the world’s financial markets. And to understand them is to understand a little of the history of the world economy.
How does economic depression affect people?
Society is deeply affected by the economic depression, entire families are suffering the consequences of something they could not even fully understand.
Because it is a recession, economic depression affects people especially in the following fields:
- High interest;
- Bankruptcy of companies.
If we analyze the economic depressions that already existed like the one of 1929, we will find catastrophic situations, of citizens who lost their livelihood and even so when trying to look for some kind of food in the markets they were met by an absurd price increase.
In summary, economic depression is a hopeless situation and only brings harm to society. Even after passing, this type of situation is so catastrophic that it leaves marks that take time to be erased.
How does an economic depression occur?
There is not a single cause for economic depression, but several different causes that, due to the financial interdependence that different sectors of the economy present, make economic depression something possible.
For example, the 1929 depression was caused by very disconnected factors that unfortunately when added together gave rise to the great recession. O end of World War I it destroyed some countries in Europe, which, because they were without resources and desperate, appealed for the importation of resources from the United States.
Driven by the recent expansion in exports, the United States began to have a rise in credit for companies that exported. When the countries recovered, the source of imports dried up and the final blow was dealt that snowballed the depression of 29.
There were other reasons, less important, but this brief episode already shows the complexity of the subject.
How is economic depression different from clinical depression?
Clinical depression has very little to do with economic depression, save its name. However, there is a macabre but real parallel between the two. The economic depression produced a large number of clinical depressions.
Economic devastation has led to countless people showing symptoms of clinical depression in countries that have suffered from economic depression. Some cases resulted in tragic suicides.
What to do to overcome the economic depression?
Just as there are many causes of economic depression, there are also many ways to recover from one. The first is to close lines of credit, the State must not promote or encourage credit either for companies or for individuals.
You also need to open your eyes to a situation of financial stress that must be overcome. It is impossible to get out of an economic depression without swallowing the bitter medicine of shortages, even momentary ones.
And finally, the market tends to self-regulate in these situations. In many cases the little interference of the State helps.
Results of an economic depression?
An economic depression causes a historic recession that is felt for many generations. Especially in the form of inflation and high interest rates.
It is also not uncommon for the market to become more aloof and distrustful of a given state after an economic depression. These episodes of strong recession are really dark chapters in the history of the economy.