Recession - How does it affect us & has it begun?

As you would all know, there are speculations about US hitting recession in 2008 - 2009. Some analysts say it won't, some say it definitely will. I wanted to find out how it hurts the normal population, especially non-US citizens or immigrants.

I ll write what I know so far. Recession is a cycle. I like reading about macro-economy and here is something I had read ages back. I am recalling it now. The immediate after-effects are

1. Job Security. When companies want to operate on lower margins, they may cut down some of their ancillary businesses or tclose some of their branches or areas of businesses and they fire people. Also they fire less effective people who are seen as cost to the company or departments whicha re on cost side of their financial books.

2. If one is self-employed in some of the sectors, there are chances that they don't get paid so much. Reason- People cut down on spending. Economy is basically created by spending and consuming.

3. Salary may not increase for a while.

4. Big investments like house-buying in case of US is halted for sometime. Reason -There is not enough money or job security for people who want to buy.


Recession is a business cycle ( Image) . An economy faces both upswings and downswings. Compare it with Indian upswing. Economy is asia is doing well. More buys, new ventures, new employment opportunities, increased standards of living and a prosperous cycle. Inflation is by-product of a growing economy. So that also has to be kept in control. This is depicted by an upward spiral here.
Recession can happen within a company or an industry.

The article mentions that ' It's just an expansion and contraction of economy'. That's a macro understanding.

Let me stop here. Let the ball roll and let's understand more.
Do not forget to read the post 9/11 situation explained in that article.

If you did not use the links, I mentioned you can choose to see the image for recession that I have created as a link to aid better understanding.

if it happens than i think each and every one has to pay for it
coz i heard that in U.S. its happens in every 4 years

I wanted to find out how it hurts the normal population, especially non-US citizens or immigrants

.

Narrowing down to immigrant indians, Most of the past recessions did not have a big impact. Instead of the average 2 mos. it takes to switch a job, took a bit longer. We came to this country during the recession of Reagan's administration and have lived through quite a few. With the cultural mind frame of frugal spending and saving for the rainy day during good times, I would say the financial impact on immigrant indians is minimal (the stress is the same as any others).

General thinking is the economy would already be on the upward swing by the time average american is aware of the country's economic recession. Hope this one doesn't last long......

That was a complete reply.
Thanks blondie.

Hi,
I remember the last recession in 2000.
Many people lost their jobs and had to go back to India.
As a result of all companies squeezing their pockets, SW jobs in India also had bad impact.
The main effects of recessions :
1. Employments
2. Low Consumers confidence
3. Engery costs high.

I think FED is trying hard to stop the comming recession by cutting the fed rates and tax would be eased this year (that's what I heard)

Thanks,
Punitha

Is the sinking dollar value related to recession or the high crude oil cost?(or may be the recession leading to higher crude oil costs....sorry...my knowledge in economics is below average)

This is really going to impact us especially when we earn here and spend in India..

Recession is not by just exchange rate or crude oil rates, it is overall economy of a country growth. It is going to impact everybody in many factors. People doesn't want to spend much, they would like to save and job rates might go low and there won't be much increase in salaries etc.

Originally Posted by shravanthika

This is really going to impact us especially when we earn here and spend in India..

This is exactly one of the reasons for kicking off a recession i.e not returning the money back to the economy that generated it. This is not only true for indians (miniscule amount) but also for 90% of south american workforce legally or illegally employed in US (major impact considering that for some countries the cash flowing in from such remittances are a major part of their economy)

As for people losing jobs and returning to india, they had to return back to india because they needed their H1 status to remain in US. Once that job is gone then other than becoming illegal, this will be their only option. People on permanent residence status mostly stayed back and were able to tide over without much financial hardships.

Coming to the spending habits of people of indian origin, the only areas that they differ from average americans is that they don't spend what they already don't own (i.e borrow to spend). This kind of borrowing to spend only leads to insolvency and does not contribute positively to the economy . So this spending habit is mostly considered as a rolemodel by many economists.

Thanks for elaborate replies blondie.
Can you explain what do you mean by ' not Returning money to the economy that created it ? '

Visa problem is the core cause as blondie said. Country recovers but H1 becomes an issue till a person regains his/her job if lost. But isnt the firing too less given that H1 holders contribute to economy. Arent they too precious to be lost ? There might be marginal firing, but not on a large scale right ? Pardon me if that was an obvious answer.

This time sub-prime lending was the main cause. ( For those of you who do not know what that is, in simple terms, it means lending home loans to people without enough credibility. ). See the 9/11 example in the link I have pasted in first post of this thread. As a result of sub-prime lending, all related industries got affected and confidence level of people dropped, spending reduced making the market dull. Stock prices fell and nobody wants to invest in US economy. Everybody wants to invest in growing markets like the Asian ones. As a result of this demand for dollar ( In FOREX, they have money market where they sell rupee, dollar etc). Demand for dollar decreased but demand for other currencies rose ( Simply because poeple want to trade in those countries). Dollar value reduces this way.

Now once dollar reduces we ll be paying more dollars for same imports. For example, we were paying 10$ for an item imported from india ( Let s say the item costs 480 rs. at 1 dollar = 48 rs. ). Now once dollar value falls as a result of economy, we ll be paying 12$ for the same item at 1$ = 40 rs.). Similarly sona masoori rice price has increased, thuar dhaal costs more and all imports including indian increase in price. Obviously the salary gets less in terms of rupee , so they say that, dont invest in india now, wait till dollar raises ) Not a great news right ? Only hope is the situation will reverse. Recession has a time-line and it's just a cycle, a rise and fall rhythm.

Can you explain what do you mean by ' not Returning money to the economy that created it ? '

by the above my meaning is not being a consumer in the economy that generated the revenue not literally returning the money )

taking your given examples, if people instead of investing here, invest their savings in their home countries, the loss to this US government and economy is the loss of taxdollars (on the profits), loss of demand for consumer products that the investments produce (if you buy a home as investment property here, you have to pay the county taxes, you pay the realtor's fees, pay the closing costs, and n number of expenses associated with the purchase of a property. If selling the house which has appreciated nicely, there is money in there for the government and everybody associated with the sale of it) it is this money(sales taxes) that is funding the local governments and also the local economy.