<p>Todays incoming recession is being caused to contain inflation.</p>
<p>It all started with covid relief packages, Governments all over the world overnight generated trillions of money which were then provided to citizens</p>
<p>Now everybody had money so demands for good sky rocketed but due to covid restrictions supply of goods was low, as lot of money was chasing small amount of goods prices of those items increased</p>
<p>Government thoughts with covid restrictions removed &amp; supply chain restored inflation will come down as more goods will be available but the money printed was very high so prices still remained UP &amp; with sanctions on Russia energy prices also went UP</p>
<p>For a short time high prices benefit companies as they earn more due to increase prices but if prices remain high for a long time demand decreases and revenue falls</p>
<p>So now everyone decided to bring inflation down &amp; how they will do it is by increasing the interest rate. When interest rate are high it means business &amp; individual will have to pay more if they take loan, so everyone avoids taking loans which means low capex from business and low purchases by consumers which means decline in expenditure by people which means decline in revenue of companies</p>
<p>Also to squeeze out extra money from economy government offers high interest rate on its securities which are called risk free investment, so people sell stocks and buy government bonds which means falling stock market</p>
<p>This continue to happen until everyone agrees extra money is squeezed out of system and prices came down to normal level but like universe after few years or decade this cycle will again repeat itself</p>

CC BY-SA 4.0
2022-10-09T05:49:42.577Z
2022-10-09T05:49:42.577Z
anuraag shukla
<p>Recession is expected to hit the world, according to recent news reports. I wanted to know why the recession is approaching because I'm new to this area. What are the main elements causing it?
Even developed nations are struggling to survive the recession. Why did things go bad for them?</p>

CC BY-SA 4.0
2022-10-07T20:29:19.000Z
Don't these news articles also explain this? For example, in many countries in Europe you pay several hundred Euros more per year on gas/electricity. On top of that, other necessities like food also increased significantly in price. Unless your wage growth completely offsets this (and on average it definitely does not in Europe), you will need to cut spending somewhere. Even worse, interest rate hikes make your outstanding loans a lot more expensive as well. I suppose you must at least feel some of the effects yourself?
Alex
<macroeconomics><markets>
Economic Recession
Robin
# Economic Recession

(Asked by: username_0 on 2022-10-07)

Recession is expected to hit the world, according to recent news reports. I wanted to know why the recession is approaching because I'm new to this area. What are the main elements causing it?
Even developed nations are struggling to survive the recession. Why did things go bad for them?

**Tags:** macroeconomics, markets

> **Comments:**
> **username_1**: Don't these news articles also explain this? For example, in many countries in Europe you pay several hundred Euros more per year on gas/electricity. On top of that, other necessities like food also increased significantly in price. Unless your wage growth completely offsets this (and on average it definitely does not in Europe), you will need to cut spending somewhere. Even worse, interest rate hikes make your outstanding loans a lot more expensive as well. I suppose you must at least feel some of the effects yourself?  

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## 1 answers

### Answer by username_2 on 2022-10-09. Score: -2

Todays incoming recession is being caused to contain inflation.

It all started with covid relief packages, Governments all over the world overnight generated trillions of money which were then provided to citizens

Now everybody had money so demands for good sky rocketed but due to covid restrictions supply of goods was low, as lot of money was chasing small amount of goods prices of those items increased

Government thoughts with covid restrictions removed & supply chain restored inflation will come down as more goods will be available but the money printed was very high so prices still remained UP & with sanctions on Russia energy prices also went UP

For a short time high prices benefit companies as they earn more due to increase prices but if prices remain high for a long time demand decreases and revenue falls

So now everyone decided to bring inflation down & how they will do it is by increasing the interest rate. When interest rate are high it means business & individual will have to pay more if they take loan, so everyone avoids taking loans which means low capex from business and low purchases by consumers which means decline in expenditure by people which means decline in revenue of companies

Also to squeeze out extra money from economy government offers high interest rate on its securities which are called risk free investment, so people sell stocks and buy government bonds which means falling stock market

This continue to happen until everyone agrees extra money is squeezed out of system and prices came down to normal level but like universe after few years or decade this cycle will again repeat itself


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