Depression or Recession?

Are we heading into recession or depression?

A recession is defined by two-quarters of decline. There can be a difference in developing countries decline in GDP. Normally it lasts for a few months. since World War II there were only four global recessions (in 1975, 1982, 1991 and 2009), all of them only lasting a year. The IMF estimates that global recessions occur over a cycle lasting between eight and ten years.

Whereas depression

Since 1854 the world has seen only one the great depression if 1929 which lasted for almost 10 years. Depression is an extended recession that lasts for years, not for quarters. It's more severe than a recession. Unemployment reaches 25%, housing prices plummet 30%, and prices fall 10%. The devastation of depression is so great that the effects of the Great Depression lasted for decades after it ended.

The question is where are we in the current situation?

A depression like 1929 is not likely to happen in modern times. Central banks around the world are much more active in regulating the economy and monetary policy. The governments are already taking steps and introducing stimulant packages for the public at large and businesses.

Right now we do not know how long the Corona Virus pandemic is going to last. It's going to disrupt the complete supply chain besides lots of lives will be lost. We only have one pandemic Spanish Flu of 1918 as an example in the last century and recession followed by that pandemic lasted only for 7 months despite around 50 million people died worldwide.

These are tough times especially for small businesses and people in jobs. People in jobs need to survive on minimum spent and during these locked down, periods maintain your positivity, learn new skills which are going to help you to secure better job post-recession. Small business owners must hold on to cash, drastically cut down all expenses. Do not lay off your employees specially the good ones instead talk to them. Request them to survive on some minimum expenses and as the business revives the back wages will be compensated. Remember a business is nothing without a great team.