Recession, recession, recession is all that we hear about today. It is all over the news, the Internet, and it is the topic of many people’s conversations. Many will tell you that money isn’t everything, but right now our nation’s lack of money seems to be consuming us. We hear this word so frequently, but what is a “recession”?

Well, a recession is a period of staggering economic activity, where, typically, unemployment, national debt, and inflation rates go up and household income, GDP, and corporate profits fall. The main culprit behind recessions is inflation, or a general increase in the price of goods or services. This makes the money in circulation worth less, thus everything is more expensive. During occurrences like these the government will resort to drastic measures such as collecting and destroying money in an attempt to make it more valuable.

Recently, lay offs have been an issue, due to declining corporate profits. And it is not just dot comers that are losing their jobs; employees are being let go in all sectors. Even public safety officers, like firemen and policemen, are being laid off. Businesses are going out of business regularly and home foreclosures are rampant. This is our nation’s largest problem right now, but what is our nation doing to help?

           

Many are critical of the Federal government and the Federal Reserve when it comes to the recession, after all, isn’t the government supposed to keep us safe? Others will blame presidents that are no longer in office or old Federal Reserve chair men however, these critics do not realize the fact that recessions are supposed to happen. The natural cycle of business has ups and downs. In order to have good times, there must be bad times. Yes, this recession is the largest recession in American history, however, the general public often acts like recessions can be prevented. The government is trying to stop the bleeding.

           

First off, the Federal Reserve has a lot to do with the health of the nation’s economy. While the Federal Reserve, is not ruled by the government, they loan money to the government and control the distribution of physical money. The Fed’s chairman, Ben Bernanke, has been under much scrutiny lately for our economy’s demise. However, he is a man well fit for the job. In a “60 Minutes”, interview, Bernanke explained that his area of expertise was the Great Depression. He has constructed a plan to revive the economy based off his observations of the Great Depression. The first step that the Fed has taken that is promising is lowering interest rates. The Fed has promised to keep rates as close to zero percent as possible until the year 2014. This will promote healthy borrowing and will also reduce debt.

Second, the housing sector has experienced large growth. Thanks to the Fed’s lower interest rates, banks are able to borrow for less, and thus buyers can borrow for less. The housing sector is important because it accounts for approximately 5% of the nations GDP. In addition, everything that goes into a house (furnishings, appliances, services), accounts for an additional 20% of the nation’s GDP. The debt that the housing sector held has been reduced by 1 trillion dollars since 2009.

Also, the energy industry has had a recent boom. The growth of the industry has utilized more forms of energy. This has brought down the price of oil and also gas. Since April 2011, gas prices have gone from $3.94 to $3.41, equivalent to a 50 billion dollar tax cut. In addition to lowering prices, it has also increased jobs. The extensive research and development of the alternative energy sources have created job opportunities for many people that were previously hunting for jobs.