A recession is bad enough. A double dip recession is even worse.
Before we talk about a double dip recession, let us understand about the definition of a recession.
What is a recession?
A recession means two continuous quarters of decline in Gross Domestic Product. Gross Domestic Product of a country takes into consideration government spending, consumer spending, business spending and the net difference between import and export.
Gross Domestic Product basically means the total of all services and products produced in a country.
If a country experiences a recession, that means that the businesses stop spending money. They stop producing products, and they fire workers.That leads to the consumers who refuse to spend money other than for essentials.
If this continues for six months, the country is officially in a recession.
If the country starts to recover from a recession, the worst thing to happen is a double dip recession.
Can you imagine a recession of a year, followed by a recovery of six months, and then another recession? That is a nightmare for the government.
The governments in many countries are doing their best to prevent a double dip recession. They do not want to face another period of high unemployment.
However, a double dip recession is always a possibility. The investors around the world are fearful.
An event in one country can send the whole world into a double dip recession.
The debt problem in Greece has not gone away. If the debt problem continues or worsens, Greece can drag Europe into a double dip recession.
The economic and real estate bubble in China can burst anytime. While the Chinese government is very prudent in the monetary
The US government fails to create enough jobs to keep the country in full employment. It is true that the economy is recovering. However, the risks of double dip recession are present.
The problem is that many countries need a structural change. The jobs that are gone will not return.
The people need to learn new skills. The governments need to chart into new industry. The governments need to get rid of excesses in the banking and finance sector.
Speculation in the stock markets and real estate always creates bubble. When the bubble burst, the country goes into a recession.
Globalization makes the world go into a recession. As long as China, US, and Europe cannot solve the fundamental structural problems in the economy, the risk of another recession is present.
If the double dip recession occurs, it may be worse than the last recession. The fear and hopelessness of consumers, businessmen and investors make it hard for the world to recover from a double dip recession.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways.