@Brighteye
But if it's so obvious that you want to be where you're in demand, why would you consider the positive aspects of recession to include increased uptake of higher education?
Brighteye, you are familiar with the concept of opportunity cost, right? If not, you should read up on it. Since a recession makes the job market tougher, the opportunity cost of going to get more education, rather than going into the job market, is lessened. Thus, there are more applications to schools when the market is in recession. This fact has been noted in our last 3 downturns here in the US
Oh yes, another question: why was Gordon Brown so keen to get rid of the old cyclical nature of the economy if it has positive aspects? They must be outweighed by negative aspects. Or is there a difference other than in scale between a mere downturn and a big recession?
Because a recession has negative political consequences. A mild recession has a small negative economic effect on average, but its likely a sector is very much hurt, and that sector cries...alot. Its why lobbying works so well
@Paul in Saudi
While a recession can be limited to one sector of the economy, it can also spread quite widely. Oddly bankruptcy lawyers are rarely impacted by a recession.
A semantical retort is quite meaningless. I spoke about the average recession.
As you indicated, this is a good time to borrow money (if you can).
Actually, that's not true. Borrowing costs are lowest when the economy is at the end of a recessionary cycle. Inflation then picks up, making your debt worth less. This is because you are paying back a fixed amount in cheaper dollars.
But your ability to borrow has also declined as the value of your underlying assets (your house, car) has also declined.
A car is a declining asset from the day you buy it. A horrible example. Have home prices declined everywhere? In my neighborhood, they've gone up .5% year over year. You're making an assumption that doesn't even account for renters...
Besides why would anyone want to lend you money when the price of the loan (as a percentage) is so low?
Well, a basic look around the market would tell you that ALOT of companies are still offering mortgage loans. Loaners get a (assumed) certain return. You bear the risk
But the decline in purchasing power makes old debt, that contracted before the recession, more and more expensive.
No it doesn't. Your logic is completely faulty here. If you have 1000 in debt, and the value of the dollar declines, you still have 1000 in debt, but now you are paying it back in cheaper dollars. Given severe enough inflation, your debt is wiped out by a single dollar bill (Zimbabwe?)
That is why it makes sense for people to walk away from homes and cars that are no longer worth the pre-recession price.
First, using cars as an example demonstrates a profound lack of economic understanding. Homes are , on average, an appeciating assets. Cars are, on average, a depreciating asset.
Secondly, folks are walking away from homes in part because their rates are adjusting upwards, and they can no longer afford the home payment. THAT creates an oversupply of homes on the market. THAT drives the price of homes down. That leads to folks being underwater in their mortgages. I mean, seriously, dude? Do you understand basic economics?
Why have you not noticed the lower prices of stuff?
No. The grocery stores don't have lower prices. Best Buy doesn't. What's your point here?
This is why European tourists can come to America at a steep discount nowadays.
Its cheaper for them to come because the Euro has appreciated against the dollar! Not for any reason you cite.
Dude.
SWEET!
