What is a recession? This word is often thrown around the dinner table and the grocery store but everyone doesn’t necessarily know what it means, despite being very affected by it. After Treasury Secretary Scott Bessent admitted that some “sectors of the economy” are showing signs of recession, it is important for students to know exactly what one is.
According to Investopidia.com “A recession is a significant and widespread downturn in economic activity that typically lasts for longer than a few months.” In the financial world the year is broken up into quarters, –which is three months– and a period of downturn must be longer than two quarters to be considered a recession.
The 2008 downturn was caused by the lending of subprime mortgages because of the increase in mortgage demand.
Because of the housing crisis in 2008, a major recession hit the United States. Caused by banking mismanagement, it created one of the biggest recessions since the Great Depression and struck fear in the hearts of many Americans.
The recession was caused by large financial institutions like Lehman Brothers and Goldman Sachs handing out risky loans. The mismanagement of loans created a problem when the housing bubble burst and anxious loan owners tried to withdraw all the loans they had, which the bank did not have enough money for. Also, many people could not pay for their loans leaving homes to be foreclosed on.
These loans caused an economic collapse, which had widespread effects. The government tried to combat this by bailing out many of the bank companies.
Many teachers at GlenOak High School felt the fallout of this recession through the cancellation of field trips and voluntary pay freezes.
According to financial literacy teacher Brian Richeson, it affected schools so much because of the school district’s income being tied to the property market. If a recession were to happen today, many students would feel the impact through the lack of funding the school would have at their disposal and heavy funding cuts for school programs.
During the year 2020, a large-scale virus created a pandemic all across the world. The pandemic isolated many from their family and outside recreational activities. People were unable to effectively stimulate the economy via purchasing products.
The isolation also affected suppliers, which prevented businesses from getting their usual shipment of products. Without proper stimulation, the economy cannot function, which is exactly what happened in 2020. The fallout can still be felt today through the present inflated prices.
The government combated the slowing of the economy by handing out Stimulus Checks, which was far more efficient than its previous 2008 attempt to intervene.
Credit card debt among young citizens was on the rise in 2022 because of the cut of government-funded programs. This was caused by the lack of taxable income in 2020, as well as the incredibly inflated prices which we still feel today.
Teachers did not feel the impact of this recession as much as the 2008 recession, according to Richeson. Their job was still very important, and did not feel the widespread lay-offs happening at the time.
Why should students care? The possibility of a recession is something students should be cautious of due to how it can affect the education quality of high school, creating a more stressful experience for students and parents. Understanding what a recession is can help people be more informed about the financial state of the country and have a better understanding of the economy as a whole. Recessions are very complex issues that can have a wide variety of causes. People of all different careers can feel the impact of these downturns, but with a greater understanding, we can lessen the fear of their uncertainty.
