There is one more term called depression which is more severe than a recession. Depression is the extreme case of recession, a depression is normally characterized by abnormal increases in unemployment, restriction of credit, price deflation or hyperinflation, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. The most well-known depression is the Great Depression of 1929 that affected most of the economies in the world for around ten years. The depression began during the Wall Street Crash of 1929.
But let’s forget the depression, focus on recession, better say the latest recession which has created troubles in our lives. The most important reasons for economic recession of 2008-2009 are high oil prices, high food prices, and a important credit crisis leading to the bankruptcy of large and well established investment banks like Lehman brothers as well as commercial banks in many nations around the world. These fluctuations in world economy has caused increased unemployment, high price rises etc. The International Labor Organization (ILO) has predicted that at least 20 million jobs will have been lost by the end of 2009 due to the crisis – mostly in “construction, real estate, financial services and the auto sector” – bringing world unemployment above 200 million.
In the early 1920s Germany experienced one of the most severe inflations of all time.1 The inflation was not apparent in 1920, but began showing up in 1921. Thereafter it got steadily worse until it came to an abrupt halt at the end of 1923. At its worst in the second half of 1923, prices rose more than fivefold each week
Some idea of the magnitude of this catastrophe can be seen in table below. During 1920 and early in 1921 the signs of inflation were mixed. The price of food was increasing, but the price of dollars in terms of marks (the mark was the name of the German currency) was dropping, and so were the prices of products bought from the United States. However, the signs of inflation were unmistakable in the next year, from mid 1921 to mid 1922. In this period prices increased about six fold--that is, it took six marks at the end of the period to buy what one mark would have bought at the beginning. But this rapid inflation, greater than any yearly inflation in the history of the United States, was only a prelude for what was to happen.
MEASURES OF GERMANY HYPERINFLATION
Percentage Change in Various Measures of Inflation
Dates Internal Prices Price of Dollars Cost of Living*
Feb 1920 to May 1921 4.6% -37.2% 39.2%
May 1921 to July 1922 634.6% 692.2% 417.9%
July 1922 to June 1923 18094% 22201% 13573%
July 1923 to Nov 20 1923 854,000,000,000% 381,700,000,000% 560,000,000,000%
*food until June 1923, thereafter based on all items. These data were calculated by the Statistical Bureau of the Reich. All data are from The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany by Costantino Bresciani-Turroni (Augustus Kelley), pp. 30, 33, 35-6.
From the middle of 1922 until the middle of 1923, prices increased by over 100 times. Measured by the price of food, prices were 135 times higher at the end of the period than they were at the beginning. Measured by how many marks it took to buy a dollar, prices were 222 times higher. Yet even this horrid inflation was mild compared to what happened from July to November of 1923, when prices increased by somewhere between a million and a billion times their previous level.
The rapid increase in German inflation can be seen in the postage stamps that were issued during this period. (See the picture below.) In 1920 the highest valued stamp issued was for four marks. In 1923 the denominations were changing so rapidly that the post office could not design new stamps fast enough and resorted to using old dies and then overprinting them with new values. The highest value reached in 1923 was for 50 billion (50,000,000,000) marks. A great many of these stamps must have been issued and bought, though not necessarily used, because very few of the almost 200 varieties of stamps issued from 1921 to 1923 have more than.minimal collector's value. Also, stamps that were post ally used during the period have a higher collector's value than stamps that were never used a pattern that is quite unusual.
Inflation hurts some people but helps others by redistributing wealth and income. Buyers, for example, are hurt by higher prices, but offsetting this is the gain that the producers get from the higher prices. People on fixed incomes will suffer, as will creditors, who are owed fixed amounts of money in the future. On the other hand, those making fixed payments, such as most debtors, will benefit. The German hyperinflation illustrates the redistribution that inflation causes in a dramatic way. It eliminated the value of all life insurance policies and all savings left in banks. When life insurance policies were paid in 1923, the value of the check was usually worth much less than the stamp used to post the letter. The hyperinflation eliminated all debts that existed prior to 1921. For example, the value of German mortgages in 1913 measured in U.S. dollars was about $10 billion; in late 1923 these mortgages were worth only one U.S. penny.
By 1924 the inflation had radically redistributed the wealth of Germany. The segment of society that was hit the hardest seems to have been the middle class. The poor had little wealth to lose while the rich were often able to get their wealth into forms not adversely affected by inflation. Wealth held in foreign bank accounts, gold and precious metals, and land maintained value.
If redistribution were the only effect of inflation, one could argue that it is not a serious problem. Since for every loser there is a winner, society as a whole may break even (if this redistribution is not seen as being too "unfair"). However, inflation also makes ordinary decisions more difficult to make, and it causes people to change their behavior. The changes in behavior, which cause social losses, are again dramatically illustrated in a hyperinflation.
Coping with a situation in which prices could double in a day meant changes in the way people organized their financial affairs. Wages were paid daily or several times a day, and the whole family would immediately go out and spend the money before it lost value. In The Black Obelisk, a novel set in 1923, Erich Maria Remarque describes this practice:
"Workmen are given their pay twice a day now--in the morning and in the afternoon, with a recess of a half-hour each time so that they can rush out and buy things--for if they waited a few hours the value of their money would drop so far that their children would not get half enough food to feel satisfied."2 Getting rid of money was the key to financial survival since it lost its value so quickly.
Merchants eventually found that they could not mark up prices as fast as they were rising.
"So they left the price marks as they were and posted (hourly) a new multiplication factor. The actual price marked on the goods had to be multiplied by this factor to determine the price which had to be paid for the goods. Every hour the merchant would call up the bank and receive the latest quotation upon the dollar. He would then alter his multiplication factor to suit and would perhaps add a bit in anticipation of the next quotation. Banks had whole batteries of telephone boys who answered each call as follows: '100 milliarden, bitte sehr, guten Tag.' Which meant: 'The present quotation on the dollar is 100 billion marks, thank you, good day.'"3
The great inflation led to a large waste of society's resources. Just coping with the rapid change required resources--the extra bank clerks that Bopp mentions are but one example. Talented people no longer tried to earn money by productive activity, but sought ways to stay ahead of inflation, an activity unlikely to have any social benefits. Fortunes were made by those who speculated on the continued worsening of inflation. People who borrowed heavily almost always did well.
People dislike inflation because it redistributes in ways they consider unfair, because it forces them to take actions to protect them, and because it makes decisions more difficult to make. Decisions to buy, sell, or invest are based on a person's knowledge of what normal prices are and this knowledge of normal prices is based on remembering past prices. With inflation, a person must remember not only past prices, but also the dates of those past prices, and then must try to compute what their present equivalents would be. Because our mental capacity to handle large amounts of information is limited, and because inflation requires us to handle more information in order to make decisions, inflation, even when it is perfectly predicted, reduces our ability to make good decisions. People like stable prices because they minimize the cost of making economic decisions.
The German hyperinflation came to an abrupt end in November of 1923. The man who received credit for this achievement was named Hjalmar Schacht, the new currency commissioner of the Weimar Republic. In his autobiography he mentions a little poem that indicated his popularity among common folk:
"Wer hat die Mark stabil gemacht,
Das war allein der Doktor Schacht."
This can be loosely translated as:
Who could make the mark stable?
Only Hjalmar Schacht was able.
He was less popular with those who borrowed heavily on the assumption that prices would continue to rise. Stabilization led to large losses for them, and in some cases unmade huge fortunes that inflation had built.The German hyperinflation is an example of a major economic catastrophe, one that cries out for explanation. Did some defect in the economic system cause this disaster? Was it accidental, due to an unlikely combination of circumstances? Was it due to error on the part of government policy makers? Can a society take steps to insure that a similar disaster does not happen to it? These are important questions, questions that economists have spent years studying. However, the German hyperinflation is an example of only one type of economic disaster. Another type was illustrated in the United States during the 1930s.
World economic recession & Bangladesh
World economic recession is going on since 2007. The main reason of this recession is the crisis of mortgaged loan of USA which has started in housing sector where sub prime were lending
verily. The economists known two prime reasons of this recession one is sub prime lending & another is hysterical credit default. Its also true that, this world recession increasing also for ecological disaster e.g. fire of Australia & draught in California. Many people lost their jobs & back to their country as the starting of this recession is in America. About 6 lakhs & 51 thousands people lost their job in February 2008 & in January this number was 6 lakhs 55 thousands. To face this problem many companies cut their workers. Almost 1 crore people of the world lost their job in 2008.
The effect of this recession is coming in small companies. On 26 January 2009 heavy machinery company CATARPILLAR, Medicine Company FIZER, Telecom Company SPRINT NEXTOR CORPORATION & Infrastructure Company HOME DIPO took decision to cut their workers. Bankrupt companies are increasing in number in USA. The export market of China fallen on because of Banking crisis and many people are losing work. In Japan, Spain, England, Russia, Germany, Mexico, Latin America and also Caribbean's countries contracted their job market. Bangladesh is not free from this recession. It’s telling that 3 million people can loss their job of Bangladesh in this year, side by side poverty is increasing here. This recession affected on our export. According to export development bureau during last 7 months the exporting of raw jute decreased 15.20%, jute goods 19.80%, leather 31.80% & refrigerated foods 5%.
BGMEA said their export decreased in January by 4.98% in February by 17.58% as our cloth mostly goes in USA & Europe so it greatly affects our industry. This recession greatly affected our manpower export as well. In the meantime Malaysia, Kuwait, Dubai, & Saudi Arabia returned back our workers. Malaysia cancelled the visa of 55 thousands workers. All the countries who are importing our manpower are going to cut our workers.
Whenever this world recession affected in our manpower exporting it also affects our payment. It is shown that the income from payment decreased 250 crore in February than January 2009 from Middle East. This recession also greatly affected our industry where jute, sugar, spinning mills are about to die. Our textiles are also falling in danger. From the 80 mills of jute products 17 are fully stopped, 11 of these mills are working incompletely & other mills also are in the way to stop. Out of 25 lakhs workers, 1 lakhs labor has lost their job in spinning mills, 50 thousands labor are jobless. The unsold goods of spinning mills are tk 30 thousands crore. To protect this recession government, already took many steps. Our minister went to Malaysia to save visa of 55 thousands labor. Prime minister went to Saudi Arabia to solve the problem of Bangladeshi workers.
Finance minister A M A Muhit declared a motivation package. This package is of 3424 crore tk where 13% is for export, 43% for agriculture, 18% for power, 11% for food & 15% for agriculture loan.
In this package there is no motivation for RMG sector which is urgently needed. Though almost all economists welcomed this package but they said there is no definite guidance there.
Its true that this package is not enough to check our problem but it is a motivation package. It
requires more steps. We think this package will be implemented perfectly & Bangladesh will be succeeded to free from this constant recession.
Finance Minister MA Muhith has declared the long awaiting motivation package to fight economic recession in Bangladesh. Finance Minster said that the package is not all. Government is also giving tax rebit and banks will give more credit support to the businesses.
The package was appreciated by the economists but to business leaders it falls short of opportunity, specially the garments sector feels that it was neglected in the package.
The Daily Star in its editorial urges the government to reach the target sector in time. A Star Analysis says it is a wise first recession step. Motivation package also puzzles the leather industry. Primary Textile Sector also urge the government to extend the motivation to the textile industries. MA Muhith, Minister for Finance said that necessary modifications will be made to relieve the grievances and said spinners will be included in the package. Recession is already creped into Bangladesh and now it is time to see how effectively the package could help in struggle the recession.
Surviving the Great Recession
Jyoti Rahman explores how the budget can be tailored to weather the global financial crisis By the time this piece is read, the first budget of the Grand Alliance government will have been finalized. At the time of writing, it is not clear what the budget entails in terms of policy details. However, macro-economic conditions and outlook facing our policy-makers are relatively well understood.
The budget will be brought down as the world economy passes through the most turbulent times since the era of silent movies. Pundits are calling the current slump the Great Recession -- perhaps not as dire as the Great Depression, but far worse than any recession since. The IMF's forecasts for the world economy are discussed first in this article. Then the focus shifts to Bangladesh: how have we managed thus far, and what are the forecasts for 2009-10? While Bangladesh has proved remarkably resilient thus far into the recession, a slowdown is nonetheless expected.
More importantly, there are good reasons to think that the world economy will have markedly different contours when this recession ends, and our ability to grow strongly in the post-recession world may well require carefully crafted policy support. These are briefly explored in the final section.
Bangladesh Bangladesh
World economic outlook
In late 2007, a number of large American and European banks were found to be in difficulty because of exposures to the worsening housing market in the
Then things changed dramatically in September 2008, when a large American bank (Lehman Brothers) failed and the largest American insurance company (AIG) was bailed out by the 
stopped operating as perceived counterparty risks spiked. In a matter of weeks, trillions were lost from global stock markets.
No economy with external links -- large or small, rich or poor -- was spared. Confidence slumped. Households in the rich world stopped spending. And then the financial crisis hit the docks in the last months of 2008. Industrial production and trade plummeted. The world economy shrank by an annualized rate of 6¼ per cent in the last quarter of 2008, and then by a similar magnitude in the first quarter of 2009.
While the crisis started out from the
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By any reckoning, this has been the sharpest synchronized slowdown the world economy has witnessed since World War II. The IMF forecasts the global GDP to shrink by 1.3 per cent in 2009 -- the first contraction in the post-war era. Advanced economies are expected to suffer the most -- the
The developing world will not be immune.
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