…A recession is the scariest creature in the average investor’s closet of anxieties…because they can mean lower home prices, lower stock prices and, of course, higher unemployment [but] if you’re prepared for the next one, there will be plenty of opportunities when that downturn ends. [That being said,] the more you know about recessions, the better, so here are 8 must-know facts about them.
This version of the original article by Dan Burrows and John Waggoner (kiplinger.com) has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
- Why Are Recessions Called ‘Recessions’?
- …”Depression” is used to mean an extremely sharp and intractable recession, but there is no formal definition of the term in economics…
- What Constitutes an Official Recession?
- …Two (2) quarters of consecutive GDP contraction is the standard shorthand for a recession…
- How Long Do Recessions Typically Last?
- …The longest post-WWII recession was the Great Recession, which lasted 18 months while the shortest was the two-month Pandemic Recession. Since World War II, recessions have lasted an average of 11.1 months…
- How Often Do Recessions Happen?
- … Since World War II a recession has occurred, on average, every 58.4 months, or almost 5 years….
- When Was the Harshest Recession?
- …The recession of 1873 -1877, began with the failure of Jay Cooke & Company, a major bank, which caused a chain reaction of bank failures across the country and the collapse of a bubble in railroad stocks. The New York Stock Exchange shut down for 10 days in response…
- What’s the Worst Effect of a Recession?
- An old economist joke is that a recession is when someone else loses their job, and a depression is when you lose your job…
- What Is the Best Early Warning Sign of an Impending Recession?
- An inverted yield curve – when short-term government securities, such as the 3-month Treasury bill, yield more than the 10-year Treasury bond – has been a solid predictor of economic downturns occurring before each recession in the past 50 years with just one false signal. The index of leading economic indicators – a composite of 10 indicators including the stock market and consumer confidence – is useful for those who want a broader view of the economic picture.
- Does the Federal Reserve Cause Recessions?
- …The main cure for soaring inflation is higher interest rates, which slows the economy… [and, if the Fed hikes interest rates too high to end inflation it could put the brakes on the economy resulting in a recession].