The Effects Of The Financial Crisis

The financial crisis is an ugly situation that no sane person would want to experience because it comes with very drastic results that can reduce wealth and standard of living. Unfortunately, recession is sometimes unavoidable. Unavoidable cases come as a result of bad government policies, unemployment, and unfavorable economic conditions. The good news is that human beings can find solutions to any problem they face, so when there is hyperinflation, it’s still very possible to survive.

In the past, top countries in the world have witnessed several economic recessions. Their downfall also affects other countries, especially those that depend on them for the supply of goods and services. Just recently in 2008, America faced a similar situation, though the country is already making efforts to recover from it. If they don’t employ the correct procedures, it is possible that they may witness the recession again. European countries are not exempted from this as countries such as Spain and Portugal are experiencing unfavorable economic situations. Greece is almost unable to pay its debts and Italy’s story is also frustrating. If the right steps are not taken soon, these problems may even become worse. Hence, the EU and American government are considering various bail-out plans and strategies for reforming their economies.

One of the indicators of recession is hyperinflation. Hyperinflation is a situation where the prices of goods and services rise to unreasonable levels. The situation is usually caused by currency debasement. This happens because currency’s value depreciates and salary earners find it more difficult to buy products since they have risen higher in price. In most cases, people doing business usually cope better than salary earners because they can increase the prices of their goods and services. In fact, those in the middle class face more trouble because most of their earnings come from salaries and since their salaries are not high, they are unable to get what they want during hyperinflation. Another problem that the middle class may face is that their savings will depreciate in value by the time they make a withdrawal. Interest rates on deposits are low at this time so people who have been saving in the bank for years will lose a lot of money.

Unfortunately, economic recession lasts several years and government strategies to effect reformation can take years before the results are seen. The government may also face a challenge from the population unable to believe in their policies even when sounding great. Some governments still make things worse by implementing the wrong policies. For instance, printing fiat currency in high amounts will make the economy worse because this can cause inflation.

When inflation is caused by too much money in the hands of people, printing more notes is simply a bad idea. Instead, a better strategy would be to reduce the money in people’s hands by implementing reasonable programs. More so, the government can increase interest rates so that people will be encouraged to do business which in turn can cause economic recovery and growth.

If the right things are not done on time, the people will lose faith in the government. Already, many people are considering gold and silver as a smart way of investing because their values rarely depreciate. Instead, their prices increase especially when there is debasement in currency value. Silver is also a good choice and it is most people’s alternative for gold. People without so much money to invest in gold can invest in silver without any fear of losing their money. Silver is also known for its industrial and technological applications.

When economic recession is very severe, banks and the stock market do not perform well. In times like this, the people can react aggressively and cause anarchy. Survival measures such as hoarding water and staple foods increase and some people even look for defensive facilities such as guns to protect themselves if any alarm arises. In some other cases, the people may transfer their reserves to other countries where they feel their investment will be safe.

Recession is ugly and it’s something you would not want to experience. It’s necessary to pray that these problems will never occur. Apart from prayers, helping the government to implement the right policies is also important.

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