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Recession primer

Geoff Riley

13th July 2008

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Heather Stewart writing in the Observer draws parallels with previous recessions and suggests that vastly over-inflated private sector debt will be the main cause of a painful recession and a return to the boom and bust days of the 1980s and 1990s. Three useful A2 macro concepts work their way into her primer at the end of the article:

Correction - however much you thought your home was worth, you were wrong.

Deleveraging - banks that have made risky loans trying to get their finances back in order by lending less and asking for more cash from shareholders.

Spare capacity - that means higher unemployment, mothballed factories and empty shops and offices.

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for nearly forty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD and Revision conferences in the UK and overseas.

@tutor2uGeoff

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