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What Happens During a Recession?

A couple different formal definitions exist for a recession. Here are a few popular ones:

• Suggested by economic statistician Julius Shiskin in 1975, a recession is when the Gross Domestic Product (GDP) has two down quarters (i.e. shows negative growth for two consecutive quarters). Another way to look at this is that our currency ends up buying less in other parts of the world.

• Another definition of a recession is when national unemployment rises one and a half percent in a year’s time.

• The National Bureau of Economic Research (NBER) has their own version that most economists like more. This involves a look at more factors than just the GDP or the unemployment rate. Real income, wholesale-retail sales, and industrial production also factor into whether they decide a recession is going on or not.

• Leonard Lauder of Estee Launder Cosmetics once put forth that lipstick sales could be a good indicator of a recession. The theory behind this was that shoppers would put off big-ticket purchases but placate themselves with the purchase of lower priced makeup. Therefore, if lipstick sales are up, we might be in a recession.

A recession is a slow down in the economy. However, it is more than that, a downward spiral with a negative feedback loop; a recession can take some time to recover from. Here is what happens in a recession:

• Something causes a problem for banks. Some form of over-speculation or crisis happens where they now cannot loan out money like they usually do.

• Small businesses cannot get loans to start their businesses.

• Business stagnates. New people are not hired for new businesses.

• Unemployment goes up.

• People get scared and stop spending as much money as they usually do. Credit card application and usage drops.

• Businesses fail and have to lay off people.

• Home values and mortgage applications go down

• After about a 10% unemployment rate, normal people start to get affected by the recession (i.e. not people living on the margins).

• People will start to look for recession proof commodities to invest in.

To help get out of a recession, governments will usually try a couple of things:

• promote interest cuts to encourage consumer spending

• make tax cuts to give people more money to spend

• increase money supply

• increase government spending

A very strong argument exists that excessive government involvement actually makes recessions last longer. The Austrian School of Economics, for example, advocates a laissez faire approach to the economy. They believe that government involvement is counterproductive to recovering from a recession. The Chicago School of Economics also believes in libertarianism as far as economics are involved.

Harry S. Truman, 33rd president of the US (1884-1972) was quoted in the newspaper Observer on April 13, 1958, “It’s a recession when your neighbour loses his job; it’s a depression when you lose yours.”

A credit score is the score associated with a person’s credit report. This score indicates how well a person has managed his or her credit in the past. Various methods to score a person’s credit report exist. However, the most commonly used score is the FICO score. FICO stands for Fair Isaac Corporation.

With a FICO score, the higher the score, the better the score is. FICO scores range from 300 to 850. A good score is anything 700 or above. This score is for the ideal credit consumer. They make their payments in time, they do not own that much debt, and they have demonstrated responsible use of credit for a long time.

A score below 600 will not rule you out but will probably get you higher interest rates. You can find out what your credit score is free; you are entitled to a free credit report once a year.

The following factors contribute to your credit score:

* payment history
* how much you owe
* how long you’ve had a credit history
* whether you’ve applied for new credit recently
* types of credit used

Why would you want a good credit score?

Companies use your credit score to see if you would make a good customer. Credit reports are used:

* for determining if you are a good credit card customer
* for determining how good a car insurance customer one might be
* for determining how good a mortgage customer one might be

Besides determining whether one qualifies for credit or not, the credit score also groups people into how desirable they are as a customer. Companies are willing to offer lower interest rates to people with higher credit scores because they are more desirable as customers. Conversely, the worst you credit score is, the less attractive the offers look like to you.

Besides situations dealing with credit, credit scores are also often used

* as part of a hiring decision
* as part of an apartment rental application

This may seem like an invasion of privacy but many companies are doing it.

What lowers a credit score?

* The biggest thing affecting your credit score is probably going to be missed or late payments. A lender hates seeing this on a credit report. Who wants to lend money to somebody who has shown themselves to be a bad borrower?
* Having balances too close to the maximum amount allowed on credit cards also lower a credit score.
* Applying for too many credit cards in a short amount of time lowers a credit score.

Investing on a forex market will change your life for the good or the bad. Lets concentrate of the good. Anyone with ample investments and knowledge can start a forex account. But it requires skills and understanding to learn the various underlying concepts and hence start reaping profits on the higher side. Sadly some come of the market with no ample knowledge, and lose their saving within a week and take leave of the scene dismayed as well as shocked. In this article we shall be looking into some concepts which should always be followed to gain high from forex.

One of the easiest methods to learn about forex is to apply for a demo or dummy online forex trading account. This account will be similar in the interface and deeds to the original forex accounts. But the only difference of these accounts is that instead of money, fake and artificial currencies are employed. The idea is to give the potential trader an outlook out the market. He can use the demo account as long as he wants to and learn various concepts as well as devise certain strategies which might help him out in the longer run. You can try opening account with various platforms such as etoro and avafx too.

Once the time is ripe and once you know that you can play with the bigger boys, you can request for a forex account with the nearest brokerage firm. You will not be able to create an account for yourself, that part is done by the firms which are specialized for this purpose. Much paper work is required to begin and account and make sure that there are no hidden conditions and clauses. For beginners they might help you set up a mini account for as low as 200 dollars. It is better to spend considerable time with this min account.

With the passage of time the confidence levels are again boosted. And if you are willing to continue in the market, the mini account will be upgraded to a full fledged working account. Don’t let the success get into your head. You have to extra careful and cautious in this business because people who have come into this field much earlier and those who have ample experience than yourselves have lost all their life savings by taking improper decisions. So in turn means that no one is perfect in this field and people tend to commit mistakes.

Never fall for the false promises which can be found in many web pages all over the internet. Almost all of them give the idea that money can be made easily in the forex market. Yes it is indeed true, but you have to be an expert in the forex market to attain such profits. Various strategies need to be developed by you and then it is time to apply those strategies in the market. It is always better to do the paper trading by noting down important developments in a piece of paper for future reference. Fundamental and technical analysis must also be done properly.