Category: Recession

Abstract The 21^st Century experienced a financial crisis which followed the recession that began in December 2007 lasting up to June 2009. The objective of this paper is to explain the main cause of this crisis and its effect on the international financial system as well as the economies of the affected counties. It gives a background of the “boom and bust” of the housing bubble which was the major cause of the financial crisis as the house prices fell leading to loss of the security value.

Consequently, the financial institutions to which these securities belonged suffered great losses. The rate of unemployment increased to 10% in 2009 from 5% in 2008(“Bureau of labor statistics: unemployment rate” par 1). The federal funding interest rates dropped to zero (“FRBSF: crisis and response” par 4).

The gross domestic product on the other hand decreased by approximately 5.1% and the loss of payroll jobs was at about 6.1 %( “FRBSF: crisis and response” par 1). The Federal Reserve rates reduced to zero which was the lowest they point of measure for the rates. They depended on other programs to revive the economy including quantitative easing which was divided into three phases QE1, QE2 and QE3.

In addition, there were other monetary policies like Operation Twist and Trouble Assistance Program (TARP). The government resulted to tax cuts as well an increased government spending (“FRBSF: crisis and response” par 2). These monetary and fiscal policies seemed to have a positive impact on the economy with the GDP rose from 0.4% in the fourth quarter of 2012 to 2.5%in the first quarter of 2013. Introduction The international and the US financial system were threatened as a result of the 2007-2009 recession.

This paper examines the factors that led to the recession and provides a critical evaluation of the monetary and fiscal policy measures undertaken by policy makers. Section 2 analyses the factors that led to the recession. Section 3 describes the impact of the financial crisis on the economy. Section 4 focuses on monetary policy and fiscal policies undertaken by the FED and the government to resolve the crisis.

This fact is followed by Section 5 which evaluates the impact of these monetary and fiscal policies while Section 6 assesses the current state of the economy after the crisis. The final section presents the conclusion. Causes of the recession Commercial banks were the only financial institutions that gave mortgages in the 1970’s. These mortgages could not be resold as there was no secondary market in which to sell them.

Mortgages and other loans began to be securitized by banks to enable them to be sold in the secondary markets. The mortgages were grouped together to create mortgage-backed securities (MBS) then sold to investors (“FRBSF: crisis and response” par 1). However, the banks had a difficult time in reselling the mortgages because no investor was willing to risk purchasing them as they feared incurring losses when the borrower defaulted.

To deal with this problem, government sponsored enterprises (GSE) like the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) established in 1938 and 1970 respectively came into perspective. They acted as middlemen between the investors and the banks by purchasing the mortgages from the banks, securitized them, and then resold the MBS to investors. This fact enabled banks to earn more money which they could then use to give other loans.

More households were able to obtain loans hence increasing home ownership as well as the price of housing. By the year 2000, investment banks and other shadow banking systems were participating in the mortgage-backed securities business as they were more profitable than other securities.

The thriving housing business also attracted international business people who invested in the US real estate sector (“FRBSF: crisis and response” par 1). A recession hit the US in 2001 and was worsened by the September 11^th terrorist attack .To tackle the recession, the FED reduced the federal fund rate from 3.0% to 2.5% the same year.

In 2002, lenders began issuing subprime lending which was the granting of loans to unworthy credit borrowers. These borrowers were then given adjustable rate mortgage (ARM) loans which required them to only state their income and were therefore not subjected to any credit assessment( “FRBSF: crisis and response” par 1). The ARM loans allowed the borrower to pay lower rates in the first two or three years after which they would be increased.

This easy access to credit increased the demand for home ownership and so the price of housing increased (“Federal reserve board” opinion on lending standards” par 2). In the event that the borrower could not pay, he was able to sell the house at a profit. In 2004, the FED realized that it had erred in overly reducing the taxes and to fix this it increased taxation (“FRBSF: crisis and response” par 3).

As a result, housing prices began to reduce in 2006 and the borrowers could not make any profit from the sale of their houses as the value of the mortgage-backed securities had also plummeted. Subprime mortgage borrowers started defaulting in their payments which led to the lender foreclosing on them and reselling the houses which led to the housing prices declining further. The financial firms that owned these securities suffered great losses.

Although the commercial banks were also affected, the investment banks like the Lehman Brothers and Bear Stearns were grievously affected. This fact is because they were highly leveraged meaning that a huge part of their operating money was “borrowed” money from the investors and the remaining small amount was theirs. GSEs were not spared either; Fannie Mae and Freddie Mac were ruined and therefore declared bankrupt. The financial market plummeted and the recession began.

The impact of the financial crisis on the US economy The financial crisis of 2007-2009 hit the US economy so “hard” that it left the stock market, employment rates, GDP and other sectors plummeting. In the 3^rd quarter of 2008, the GDP was at 5.6% below its potential rank, while the rate of unemployment was at 10% in 2009 up from 5 % in 2008(“Federal reserve economic data” par 1). Approximately 8.8 million people were left jobless after the recession struck (“Bureau of labor statistics” par 1).

Housing prices went up by about 30% in the year 2008. Individuals close to 5.4 million gave up searching for employment and resulted to the Federal Disability Support. As the inflation continued, median household earnings went down to approximately $49,500 in 2010(Manuel 1). The stock market also plunged with Dow Jones Industrial Average declining by 20% to close at 6,763.29 on the 2^nd of March 2009(“Yahoo finance:DJIA historical prices” par 1).

Monetary and fiscal policies The Federal Reserve undertook several measures in terms of monetary policies in order to stabilize the economy and minimize the damage to the financial system. The FED had lowered the federal funding rate to zero and could not lower it any further and opted for other means.

In March 2008, the FED gave financial firms including investment banks short term loans to enable them to run their daily operations. Primary dealers that stuck with mortgage-backed securities that had lost value were provided with treasury securities worth up to $200 million (“FRBSF: crisis and response” par 2).

Apart from providing liquidity, the FED facilitated the acquisition of collapsing investment banks like Bear sterns, Lehman Brothers, Government Sponsored Enterprises like Fannie Mae and Freddie Mac by the government to save the economy from further damages that came with investors’ withdrawal of funds(FRBSF: crisis and response” par 2).

In October, 2008, the Trouble Assistance Relief program was launched that saw the FED buying stock from financial institutions so as to provide the former with money. The FED also embarked on a program known as quantitative easing, a non-traditional monetary policy where by the FED directs money into the economy by purchasing commercial banks and other private financial institutions’ financial assets in a bid to improve the economy.

This quantitative easing was divided into three stages named QE1, QE2 and QE3.QE1 involved the easing of credit where the FED bought mortgage-backed securities and other debts from the banks and in exchange, the banks would be able to increase their reserves. After QE1 failed to revive the economy, QE2 was launched and FED began buying treasury securities hoping to stimulate demand.

Evaluation of monetary and fiscal policies The FED decided to provide financial institutions with funds to ease the credit market which had frozen and to reduce taxes so as to raise consumer spending as the two would have worsened the already strained financial system (“CNN money: Economy” par 1). Although the decision to save the collapsing investment banks was a tough one, the FED opted to bail them out instead of letting the economy plummet further.

The recession had left the government budget with a deficit due to the reduced tax returns but economists believe that the $825 billion stimulus package plunged the government into more debt as it had to result in borrowing to compensate for the extra expenditure. The borrowing would increase interest rates so as to fund the economy’s recovery. The increased government expenditure is also believed to reduce private expenditure by “crowding” them out (“Economy. Help: criticisms of fiscal policies” par1).

Current state of the economy The Gross Domestic Product (GDP) has increased from 0.4% in the 4^th quarter of 2012 to 2.5% in the first quarter of 2013(“Bureau of economic analysis: US economy at a glance” par 1). The unemployment rate has decreased from 10% in 2009 to 7.5% in April, 2013.Payroll jobs have increased by 165,000 as of April, 2013(“Wells Fargo: economic forecast” par 1).

Conclusion

The 2007-2009 recession was not the first economic crisis in the world. Other crises have been experienced like The Great Depression of 1929-1933, the 1982 recession as well as the 2001 recession. Certain similarities can be made in all the said recessions. In both 1929 and 2007, there were long-term unemployment rates, rising inequality in the wealth gap and inflation rate.

However, certain differences exist. In 1929, the real estate market was not badly affected and the prime lending rate (PLR) did not go up like it did in 2007 and in 1929. The PRL rates in 1929 went up by about 20% while in 2007 they remained at 1% through the recession. The lessons that can be made from this crisis include enforcement of appropriate regulation on financial institutions as well as adherence to standard lending rates by major business firms.

Works Cited

Bureau of Economic Analysis. US Economy at a Glance: Perspective from the BEA Accounts. 2013. Web.

Bureau of Labor Statistics. Unemployment rate. 2013. Web.

CNN Money. Economy. 2013. Web.

Economics Help. Criticisms of fiscal policies. 2013. Web.

Federal Reserve Board. Senior Loan Officer Opinion Survey on Bank Lending Practices. 2013. Web.

Federal Reserve Economic Data. Federal funds rate. 201. Web.

Federal Reserve Bank of San Francisco. FRBSF: Crisis and Response. 2013. Web.

Manuel, D. Dave Manuel.com. Median household income in the US. 2013.Web.

Wells Fargo Securities. Economic forecast. 2013. Web.

Yahoo Finance. Dow Jones Industrial Average (DJIA); Historical prices. 2013. Web.

Introduction

Recession is defined as a decline in economic performance over a given period of time. Generally, recession is a decline in economic performance for a period of more than two financial quarters (BBC News, 2008). There are different measures of economic recession such as decline in GDP, unemployment rate, business confidence among others. With the introduction of globalization countries exchange goods and services and this interaction causes spill over effects of poor economic policies from one country to another.

Economic recession is a bad economic condition which should be discouraged by government leaders. In this paper I will discuss the most recent economic recession experienced by global economies. To narrow my discussion, I will focus my topic to the economy of New Zealand whereby I will explain the effects of the recession on the economy of New Zealand. Later I will explain measures put in place by the government to reduce the recession.

Causes of the global economic recession of the 2008/2009

The global economic recession experienced in 2008 and 2009 was as a result of poor banking policies adopted in the United States. The federal government implemented a policy of deregulating sub-prime mortgages in the country leading to massive investment in the policies. Many investors borrowed money from banks to purchase sub-prime mortgage policies. By definition, sub-prime mortgage are policies with a high risk of default.

The heavy investment in these policies caused an economic bubble which burst in 2007 leading to huge losses by the banking industry and the mortgage industry. As a result of the increasing rate of inflation as well as the rising oil prices in the global markets, many sub-prime borrowers were unable to repay their mortgage loans (Organization for Economic Cooperation and Development OECD, 2010).

Massive default in the mortgage policies caused bankruptcy in many banks and this led to a national crisis. All other sectors of the industry were affected and because the economy of the United States connects other world economies, spill-over effects were experienced in other countries. Global trade reduced by great margins leading to a world economic recession (Organization for Economic Cooperation and Development OECD, 2010).

After the recession, many international organizations such as the World Bank and WTO intervened to improve trade and help governments restore their economies. In 2009 most of countries in the world started to recover from the recession. It is expected that most countries will have recovered completely from the recession in 2011.

Impact of global economic recession in New Zealand

The effect of the global economic recession started to be experienced in New Zealand in 2008 when the economy started to perform poorly.

More than 5 percent decline in the real GDP in the countries of the Organization for Economic Co-operation and Development (OECD) was experienced over the four quarters of the year 2008. In the OECD the economic recession of 2008 was the largest since the great depression. The recession was experienced in two consecutive years 2008/2009. In New Zealand the recession started in the March 2008 quarter.

Between the December 2007 quarter to March 2008 quarter, the economy declined by 3.3 percent and this was the greatest drop in economic performance in the history of New Zealand (The Treasury, 2010). However, the country never experienced the worst economic recession because there was a sound financial system which supported the economy during this turbulent period as compared to other OECD nations.

Source: The Treasury (2010)

The banking industry was adversely affected by the economic recession of the 2008/2009 in New Zealand. The lending capacity of most banks was reduced such that there were no funds available to lend to the general public. Many banks collapsed while the remaining banks had no lending capacity. Credit availability was reduced and investors could not obtain loan from banks. As a result all other sectors of the economy were affected because the banking sector is a link to all other sectors of the economy (Braddock, 2008).

The profitability in the banking industry reduced by great margins during the recession and this caused low investor confidence. Investment levels, both domestic and direct foreign investment, reduced leading to retarded economic growth. It is well known that investor confidence reduces during recession therefore, during the 2008/2009 recession most of investors feared investing in most of the industries.

The labour market was the worst hit by the economic recession. Generally, in OECD countries unemployment was reported to have declined by from 5.7 percent to 8.6 percent from 2008 to 2009. This resulted to approximately 15 million people being unemployed in the OECD nations.

New Zealand experienced an increase in unemployment rate from 3 percent to 6.5 percent by September 2009. Compared to other previous recessions of 1991 and 1998, the unemployment rate was the lowest (unemployment rate in 1991 was 11.2 percent and 7.9 percent in 1998) (The Treasury, 2010).

The global recession caused reduction in trade leading to decline in the opportunities for employment in New Zealand. The overall effect was massive unemployment in most industries in the country. It is a general economic concept that when the rate of unemployment increases the income level of the people decline leading to high poverty levels.

High rates of inflation were experienced in New Zealand during the recession. Inflation is the persistent and continuous increase in the prices of products over a given period of time. Inflation during an economic recession is a common happening and this reduces the purchasing power of consumers in the economy.

The living standards of most people in New Zealand reduced during the 2008/2009 economic recession. The food prices in the country escalated and many people were affected by hunger making them economically unproductive (Braddock, 2008).

The economic recession affected trade in the country such that imports exceeded the imports. The government had to import a lot of food products to feed the large number of hungry citizens, poverty levels were high and there was need to increase production in the economy to create more opportunities for employment.

New Zealand experienced a trade deficit during the recession causing low GDP during this period. Production in almost all sectors of the economy was reduced leading to adverse effects on the level of output of industries in the country. The government had to intervene by establishing economic policies which would favour trade within the country and with other countries. To enhance trade the government had to use both fiscal and monetary tools to bring back the economy to normal (International Monetary Fund, 2010).

Possible responses to the changes caused by the recession

In late 2009 the economy of New Zealand started to recover after the government employed both fiscal and monetary policies. However, the rate of unemployment was still high during this period and a lot of investment was required to reduce the rate to sustainable levels.

To reduce the impacts of the economic recession, the government of New Zealand liaised with global organizations such as IMF and World Bank to fund projects which would improve the economy. To improve trade, the government has established partnerships with other countries to increase the amount of products traded in the international market.

The WTO has also intervened by removing most of the barriers to trade which had been established by governments as a measure to curb the spill-over effects of the recession. The government has borrowed a lot of funds to recover from the recession. To finance the trade deficit the country had, the government had to borrow from IMF to finance some projects which would improve the economic performance (International Monetary Fund, 2010).

Conclusion

Economic recession is a period of reduced economic performance when all sectors are affected. New Zealand was adversely affected by the recession in 2008 and 2009 but by the beginning of 2010 the economy had started to regain. The banking industry was the worst hit by the recession which led to reduction in performance of all other sectors of the economy in the global scene.

High rates of unemployment, inflation and other adverse effects of recession were experienced in New Zealand and other countries in the world. Sound financial policies should be developed by the government to enhance economic stability even during turbulent seasons.

References

BBC News (2008). New Zealand falls into recession. Web.

Braddock, J. (2008). New Zealand economy sliding into recession. Web.

International Monetary Fund (2010). New Zealand: 2009 Article IV Consultation.

Organization for Economic Cooperation and Development OECD (2010). OECD Economic Surveys: United States 2010. OECD Publishing. Web.

The Treasury (2010). Special Topic: Recession and recovery in the OECD. Web.

Introduction

Recession is a period when most firms are faced with the worst trading environment and generally, firms become victims of making critical and hard decisions in order to remain relevant in the market.

According to Jose Chao Bacardi, vice president of the American Bacardi Global Travel Retail Division, recession presents an organization with opportunity to reorganize and re-examine all the activities the organization is involved in, identifying the appropriate activities to and ways to improve them since during the recession period, an organization has to be extra cautious to the activities it takes part in (Smith, 2010, p.1).

One such re-evaluation during recession is how to influence consumers through adoption of marketing strategies that have the ability to attract or maintain customers. Therefore, this will be a critical essay analyzing the marketing strategies proposed by marketing guide article titled, ‘What to do in a Recession?’.

The Article: ‘Marketing guide: What to do in a Recession?’

The article starts by observation that recession leads to both economic downturns and numerous opportunities will result from general modification in consumer behavior. At the same time, other opportunities will arise from general reduction in the marketing activities of the rivals, which may be due to reductions in the costs for advertisements.

According to the article written by the Ehrenberg-Bass Institute, key marketing questions a firm needs in order to explore and develop its marketing strategies during recession include the following.

How much to spend on marketing advertisement, what strategies can a firm use to ensure consumer-spending change, how should pricing of products be dealt with, and will introduction of new products results into leveraging competition opportunities for the firm?

The article postulates that consumers demonstrate habitual behaviors where it becomes difficult to change their behaviors in the long run. During recession, consumers only make changes with regard to non-regular behaviors than to their almost solidified day-to-day behaviors. In such a situation, raising the price to everyday consumer goods and services is unlikely to affect demand.

With regard to pricing, the article shows that raising or lowering the price of a commodity has the effect of changing its market. For instance, James Peckham established that, if price of commodity is increased, then a brand’s market share is likely to move down to a new level.

On the other hand, when price is lowered for a brand that is not performing well in the market, chances are that sales of the brand will be boosted although there will be no altering the fundamental trend downwards (Ehrenberg-Bass Institute, n.d, p.3).

With regard to advertisement, the article observes that, studies have shown that those firms that increase their costs of advertisement tend increase their sales. Thus, drawing examples from the recession of 2003, the article confirms that those firms that increased their advertisement costs than their competitors during the recession showed slight improvements in sales as compared to their competitors (Ehrenberg-Bass Institute, n.d, p.4).

Further, the article expresses the fact that during the recession, those firms that engage in new product innovation and invention have better chances of increasing their competitive advantage in the market as compared to their rivals.

Critical Analysis of the Proposed Strategies

According to East, Wright and Vanhuele (2008), there exists close affinity between marketing and consumer behavior and marketing strategies such as use of price incentives, use of particular colors, music, and aromas in stores; while use of brand extension have the potential to influence consumer decisions about purchases.

According to the authors, before a firm adopts any of these strategies, there is need for informed-decision action that can only be generated through systematic research of the market.

Also, there is a need for the firm especially in times of, ‘tight marketing’ to identify specific groups that buy more frequently a particular category of product or service, and subsequently the firm puts in place marketing strategies that selectively target these groups (East, Wright and Vanhuele 2008, p.3).

At the same time, consumers in most cases become habitual purchasers of particular brands and this may be attributed to personality and lifestyle. Therefore, the advice may be for the firm to research more in identifying key established consumer habits and developing effective marketing strategies based on the established consumer habits (East, Wright and Vanhuele, 2008).

At the same time, research has shown that consumer loyalty increases due to pack size, price level, country of origin, flavor and formulation characteristics, which when effectively managed tend to persist for a long time.

Hence, during recession it becomes prudent for the firm to establish and estimate the likely disposable income the general population hold and in turn establish marketing strategies based on size, flavor, and other relevant formulation characteristics (East, Wright and Vanhuele 2008).

Marketing strategies during recession should also involve customer relationship management strategies since research shows that consumer habits are further reinforced as a result of effective CRM practices. What is evident during recession is that consumers will want to make appropriate but hard choices based on limited incomes and largely will want to trust any purchase decision they make.

Therefore, a firm establishing the needs of consumers and appropriately employing necessary CRM practices will win the confidence of the consumers and are likely to establish a long-term relationship with the firm, which in turn may boost the firm’s sales.

Conclusion

Although in recession most marketing strategies do not change, what is necessary is for the firms do embrace innovation in the strategies being used. Recession presents hard time for consumers to make decision and any marketing strategy that assures consumers positive results for their decision is likely to win market for the firm.

Nevertheless, during recession, consumers will still be guided by social, cultural, religious and reference group factors in making decisions (Lantos 2010). Therefore, while agreeing to the fact that advertisement, pricing levels, discounting and product innovation can be the major and perfect marketing strategies during recession.

The fact is that, without adopting qualitative elements of CRM, the strategies are likely to achieve fewer results hence there is need for firms to initiate and embrace the above outlined strategies within CRM strategies to win the confidence and trust among consumers.

Reference List

East, R., Wright, M. and Vanhuele, M., 2008. Consumer Behavior: Applications in Marketing. CA, SAGE Publications Ltd. Web.

Ehrenberg-Bass Institute. N.d. Marketing guide: what to do in a recession. (Attached notes).

Lantos, G. P., 2010. Consumer Behavior in Action: Real-Life Applications for Marketing Managers. NY, M.E. Sharpe. Web.

Smith, A., 2010. Global market review of the travel retail drinks sector: 2010 edition: Chapter 5 Sustaining investment. Web.

Keynesian Explanation of Recession

Keynesian scientists view world economic recessions as part of developed economies. This is unlike what classical scientists believe. Keynesian scientists argue that many investors are constantly looking for new ways to make money. These new ways may not be water-proof. This means that there is a possibility for something to go wrong. In 2008, there was a global recession which originated in the United States. This recession was triggered by the lending market in the United States.

Keynesian scientists argue that it is wrong to blame the players in that field for that problem. Instead, the government should bear the blame. The point is that the government should have put in place proper policies to guide the manner of doing business.

In 2008, Keynes argues, there was little policy put in place to effectively monitor, discipline and guide the financial institutions that were the central players in that field. Hence, as noted earlier, they engaged in all manner of possibilities to make profits. It might have worked in the past, but they exceeded the limit which triggered the economic recession (Hossein-Zadeh, 2009).

Keynes, therefore, does not rule out such instances in the economy at times. This is especially true when the government does not do enough to regulate most of its branches to ensure proper conduct. Hence, Keynes largely blamed the government for the failure in United States banks.

However, the manner in which the government responded to the crisis is Keynesian. The argument is that since the risk that the institutions take benefits the government, it should come to their rescue when they get stuck in such recessions. It is in tandem with Keynes recommendations to bail out the agents as the government did in the wake of the crisis.

The response of the government: the economic stimulus package is supported by the current crop of new Keynesian scientists. However, they argue that the amount that the government set aside is too little to revive the economy. The amount is supposed to have a multiplier effect on the spending of consumers. But consumers, the scientists argue are spending on long-term investments as opposed to the ‘quick spending’. Therefore, the scientists argue that the governments may not be able to revive economic growth form this front.

The scientists are however in unison when it comes to the long term expectations. They say that what the economy is experiencing is a host of short term fluctuations. In the long run these fluctuations will be weighed down by market forces. These forces will drive the economy into equilibrium.

They include price changes, consumer awareness and government policies: macro for that matter. In conclusion, Keynesian theory of economic healing in the wake of a crisis was greatly employed. Although it was tailored to the current situation by efforts of the new Keynesian economists.

However, the cause of the economic crisis had been cited by the original Keynesian theory of economics. The government was largely to blame for failing to regulate the financial markets. This is despite the fact that it has been hailed by many following its response. However, others still criticize the government’s perceived rewarding of the banks for their mistakes at the expense of the taxpayers. They argue that taxpayers should have been given the bail out money because they suffered in its wake.

Double Dip

This is a recession that is witnessed after a short-lived momentum of economic growth. Usually, this growth happens for a quarter or two quarters of a year. It is always preceded by economic down turn. The causes vary from cutbacks in spending because of the preceding downturn, job layoffs to offset costs and a fall in the demand for goods and services as people cut on their budgets.

Bond Vigilante

This is a business person who reacts to unfair policies: both fiscal and monetary. This triggers an increase in yields and hence the cost of borrowing. This is helpful and healthy to an economy. It serves as a restrain for the government to overspend or borrow too heavily. These two actions affect the economy and hence, the government treads carefully acting as a balance.

Qualitative Easing

This is method used by central banks to lower interest rates. It is considered bad and it is not recommended by economists. The government basically prints money and purchases assets in the economy. This lowers their yield because of the immediate demand. Hence many investors shy away from purchasing them.

When there are many people who want to buy certain assets, their prices increase. This lowers interest rates. Hence, it triggers borrowing. It is quite effective where the monetary policy fails or is perceived not to work (Mankiw, 2009).

Robert Skidelsky

He is a professor of political economy at Warwick University. He has constantly criticized the various governments’ handling of the economic crisis. This is especially true for the UK government. He writes for the guardian and most of his latest articles are critical of the manner in which the government is handling the economic crisis. He argues that the application Keynesian way of handling this economic turmoil is not working.

He argues that qualitative easing that the government of UK is applying is actually failing in the United States. Consumers are not spending, despite efforts towards that by the government. Instead, they are saving to deleverage as mentioned by Skildelsky. He also argues that governments are misallocating their bail out money by buying liquid assets instead of real investments. This is working to benefit only the banks that got the country in this mess in the first place (Skidelsky, 2011).

In a separate article he handles the issue of inflation. There have been arguments that in time to come thee will be an inflation ‘tsunami’. This is in light of the amounts of money the government of England and US are printing to help sinking banks and financial institutions. He, however, argues that it is rather unlikely that is going to happen.

This is because; many people are not actually spending the money on the intended arenas. Most of them are saving for real investments such as buying a house lost during the recession. Therefore, if the effect will be felt, it will be on a significantly lower degree (Skidelsky, 2011).

He goes down the memory lane by looking at the history of banks. He says that they have benefited since 1930 global recession and the ones that followed. It is like they benefit for their misdeeds. Again, his argument that it is the high time they are not bailed out again. This is in contrast with Keynes who says that it is not the fault of the banks: it is governments (Skidelsky, 2010).

In another article he argues that the economic world has wallowed in the waters of theoretical thinking for long. He says it is time for reality to prevail. He justifies this by looking at the banking sector. He says that the players in the sector have information about the likelihood of economic downturn occurring way before it occurs. While it catches many by surprise, the players have measure in place already to shelve against its impact. When it occurs, they cut spending which throws the economy into a tailspin (Skidelsky, 2011).

Paul Krugman

He is an American economist who writes a column with New York Times. He is a fierce critic of the manner in which the government is handling the economic crisis. His arguments are a sharp contrast of the Keynesian theory. He does not see the need to bail out banks. He sees them as the major cause of the crises. His argument is that these multinationals always have prior information concerning the likelihood of occurrence of an economic crisis (Krugman, 2010).

He says that they may even create one to benefit from it. He says that the people who suffer in the long run are the Americans who are left stranded in the wake of these crises. The manner in which the government is handling the crisis is a disaster in itself.

He says that bond vigilantes are going to be the undoing of the American economy on the wake of continued spending witnessed from the government. He argues that the government should have instead focused on paying off debt that people had with the banks. This way it would have stimulated the desired growth from bottom up. The risk would have been smaller, also compared to the current situation (Krugman, 2010).

Reference List

Hossein-Zadeh, I., Beyond Mainstream Explanations of this Recession, State of nature, 2009. Web.

Krugman, P., Congress Seems To Have Forgotten America’s Millions Of Unemployed, New York Times, 2010. Web.

Krugman, P., The Conscience Of A Liberal, New York Times, 2010. Web.

Krugman, P., The Great Illusion, New York Times, 2010. Web.

Mankiw, N., Money Supply and Money Demand, Macroeconomics (5th ed.), Worth, pp. 482–489, 2009.

Skidelsky, R., Beyond Keynes and Hayek, Guardian, 2011. Web.

Skidelsky, R., Economic Reform Needs A Dose Of Reality. Web.

Skidelsky, R., Make Banks Pay For Their Failures, Guardian, 2011. Web.

Skidelsky, R., The Bogey Of Inflation, Guardian, 2011. Web.

Introduction

In every business, consumer behaviour plays a pivotal role in shaping the business operations. It is important for every organisation to understand consumer behaviour in order to be able to make appropriate decisions.

A clear understanding of consumer behaviour is of great significance especially in marketing activities in an organisation (Anonymous 2011). It is also important to note that all the products end up on the hands of consumers.

It is the consumer who will determine the amount of goods and services produced. It is therefore necessary to understand human behaviour.

Impact of the Recession on Consumer Behaviour

There are several factors that affect consumer behaviour. One of these is recession. Recession is an economic problem which is characterized by low level of production and hence financial difficulties. Recession has an adverse effect on consumers and will therefore have a significant impact on their behaviour.

In most cases, a recession affects the consumer consumption habits. It is also feared that recession may have some permanent impacts on consumers which may significantly affect their spending. Recession can affect consumers both emotionally and psychologically (Shama 1993).

According to the report by Decitica, recession can have different impacts on different people. For instance, this report indicated that in America, women were more affected by the recession than men (Slideshare 2009). Generally, more women felt worried, scared, and depressed.

As a result of these effects, women will tend to change their consumption behaviours significantly. After recession, this information indicated that more women appreciate frugality, and will most probably be affected by recession (Slideshare 2009).

In other words, their spending will significantly be affected since the effects of recession will force them to act accordingly.

Through recession, some of the people are likely to lose their jobs. Therefore, such people will have to reduce their spending on luxury as well as on basic things. However, the luxury part of spending is likely to be more affected than the level of spending on basic goods.

Again, by seeing people in danger and become worried that they may themselves be in the same danger; they may be tempted to spend their money in a more careful way (Memesponge 2009). Therefore, recession will not only cause a reduction in spending on the affected individuals, but also those who may fear that they may also become victims.

Recession also affects consumers’ sensitivity to prices (Slideshare 2009). The more the consumers are sensitive to prices, the more they react to any change in price. Recession acts by increasing consumer sensitivity to changes in prices. Since recession is characterized by high financial difficulties, it is more likely going to reduce consumer spending (Slideshare, 2009).

In most cases, consumer behaviour is displayed in terms of savings or consumption. The prevailing economic conditions can significantly affect consumers’ behaviour in this perspective. For instance, people may decide to save more and consume less if they expect recession in the future as a way of preparing to face such problems.

Therefore, in case consumers expect recession in the future, then they are more likely going to reduce their current consumption. Again, if consumers are very optimistic about the future, then they will be more reluctant to save (Reynolds not dated).

This is because it will not be important to save if they expect things to flow smoothly in the future. In other words, people will tend to save less if they feel that they will always have money. Such behaviour will increase the level of consumption (Harrison 2009).

In other words, when the economic situation is favourable, people will tend to be too optimistic about the future such that they don’t care much about saving for the future.

In this case, marketers can easily maximize their sales because the level of spending is relatively higher. As Harrison (2009) puts it, if times are good, the optimism bias will tell us that times will always continue to be good.

Impact of the Recession on Marketers

As already noted, recession is an economic situation which is characterized by low demand for raw materials, products and services. Therefore, recession requires the marketers to make necessary modifications on their marketing strategies as well as their actions in order to retain their profitability as well as remaining consumer responsive (Avraham 1993).

There are several ways through which marketers can react to the recession in order to retain their profitability. Marketers can either choose to change their target markets and adapting the marketing mix (Avraham 1993).

Again, the reaction to a recession will largely be determined by how the marketers perceive the recession affects their business activities. It is important to note that recession may have varying impacts on different companies depending on their differences on their environment.

Since the demand for their services drops in a recession, marketers usually tend to apply strategies to stimulate consumer demand (Perriman 2011). In most cases, marketers tend to lower their prices in order to stimulate consumption (Avraham 1993).

Although consumers are discouraged from spending by a recession, marketers can stimulate spending by lowering prices. As already noted, even those people who are not adversely affected by the recession will tend to spend their money more sparingly for fear that they are also susceptible to similar problem.

By cutting down prices, a company may encourage such people to buy their products. According to research conducted by McKinsey Company, most of the consumers tended to buy lowly priced brands rather than expensive brands (Bohlen, Carlotti, and Mihas 2009).

Similarly, marketers tend to react to recession by offering cheaper products. By so doing, marketers are able to increase their sales since their products will be affordable to many people despite of their financial difficulties.

According to Shaw (2011), marketers also tend to retain their customers by maintaining consumer loyalty. By enhancing consumer loyalty, marketers manage to win and retain their customers.

Conclusion

In conclusion, this discussion has clearly shown that the recession has had a significant impact on the consumer behaviour as well as those of marketers. Under recession, the level of production is usually very low. As a result, the level of employment is relatively lower.

Therefore, the households’ disposable income will be significantly affected. As a result, people will tend to cut down on their expenditure on both luxuries and basic goods. In other words, the recession will tend to reduce the overall level of spending.

On the other hand, marketers will tend to apply measures in an attempt to increase their sales. Since the demand for their products will tend to be lower in a recession. They will change their strategies accordingly.

Reference List

Anonymous. 2011. Consumer Behaviour. Web.

Bohlen, B., Carlotti, S. and Mihas, L. 2009. How The Recession Has Changed US Consumer Behaviour. Web.

Harrison, P. 2009. The Recession and Consumer Behaviour. Web.

Memesponge. 2009. Top 10 Emerging Consumer Behaviour Trends in Recession. Web.

Perriman, H. 2011. The Impact of the Global Financial Crisis on Consumer Behaviour. Web.

Reynolds. Consumer Behaviour. Web.

Shama, A. 1993. Marketing Strategies during Recession: A Comparison of Small and Large Firms. Journal of Small Business Management. Vol. 31, P62-p72.

Shaw, C. 2011. The Global Recession = Global Impact on Consumer Behaviour. Web.

Slideshare. 2009. Emotional and Psychological Impact Of The Recession On Consumer Behaviour Gender Differences. Web.

Introduction

The great recession of 2008 led to monetary and fiscal policy responses to end the recession and prevent similar occurrences. Many policy responses were unconventional at the time of their proposal and enactment. They gained popularity because of the need for a solution in the shortest time possible.

After implementing the policies, countries and particular sectors of an economy would face inflation and GDP growth problems, while others that were favored by the policies would enjoy better circumstances of the same parameters.

The events that contributed to the occurrence of the great recession included inadequate monetary controls, global misconceptions, laxity in regulation, and misunderstanding of risk.

The impact of policy on recovery was diverse on the direct channels, transmission channels, and vulnerabilities of economic sectors to the recession and subsequent policy changes (Verick and Islam 2). Demand and supply numbers in any sector have a significant role to play in policy responses of governments.

At the same time, interested parties in governments’ reaction to a recession have to rely on the available microeconomic data to initiate programs and advise governments accordingly.

The United Nations, as an example, relied on the microeconomic data of several countries affected by the great recession to come up with new policy guidelines for high-income and low-income countries.

It measured the impact of policies on the increase in demand for labor. The UN used this as a means of verifying the overall impact of various policy interventions.

Stimulus package as a policy response, its motivations, and effects

The most common policy response by countries was to create a stimulus package that would target the most affected sectors of the economy.

Stimulus packages involved the release of funding by the government to act as cheap credit and stimulate demand for products and services in a particular sector so that there would be enough reasons to increase supply.

With the rise of the sectors out of the recession, economies would be able to return to their normal functioning as employment rates would improve, and people would find full employment and stop being in underemployment.

Increased demand would also increase government taxation base to provide funds for managing fiscal and monetary policies of the affected countries. The United Nations Development Program (UNDP) is a super-national organization under the United Nations.

It has been monitoring the effects of stimulus packages around the world. It advised governments on the effectiveness of the policy responses towards the significant recession. The organization provided various research reports used by Verick and Islam in evaluating policy responses by countries (34-38).

According to a report by the United Nations, global rebalancing after the great recession is taking place at the expense of the growth of economies (xv).

The report argues that the effects of policy responses have been welcomed as solutions to the great recession, but they have also created an economic growth problem.

Citing the United States as an example, the document shows that the current growth in the domestic savings rate is due to structural adjustments created by stimulus package policies.

However, in the same country, the government has increased its deficit and businesses have shrunk their investment rate significantly, which shows that the current economic growth can only last for a short while before succumbing to structural problems that will lead the country back to a recession.

The country will then recover as the government and businesses adjust. The report explains that policy responses in many countries only pave the way for a cyclic imbalance in the economy (United Nations xv).

Governments around the world responded to the great recession by initiating policies that boosted domestic consumption. China created monetary policies that increased the available money supply to consumers in an effort to spur domestic demand and reduce reliance on the export market.

Japan initiated similar responses, while the appreciation of its currency created an automatic buffer against increased consumption of imports. Nevertheless, the United Nations cautions against the imbalances in the global arena, which threaten the global exchange rate stability.

The global trade volume among countries withers with every country seeking to boost domestic consumption and limit dependence on exports. This affects the robustness of the market-based exchange rate equilibrium negatively.

An increase in global transactions is supposed to increase the reliability of the exchange rates as demand and supply match. However, specific country policies only increase imbalances in the demand or supply of global currencies and skews the exchange-rate equilibrium unfavorably (United Nations xvi).

As measured in 2008 in 48 countries, the UNDP confirmed that stimulus packages accounted for 3.9 percent of the global gross domestic product (GDP). It also accounted for 4.8 percent of national GDPs of 20 out of the 48 countries, which are developing countries.

The clearest beneficiary of the stimulus packages in developing countries was social services. One major aim of policy response in the countries was to provide social protection. Therefore, the stimulus package expenditures helped to meet the goal.

According to the International Labor Organization (ILO), as reported by Verick and Islam, the critical areas of stimulus packages intervention were stimulating job demand and supporting jobs, job seekers, and the unemployed (36).

Others were expanding social protection for food security and the use of social dialogue to protect the right to work. The findings of the super-national organization were that some policy interventions were more popular than others.

While support goes mainly to the small and medium enterprises for their role in providing jobs and stimulating GDP growth, there is less than adequate focus on the employed who need an income boost and job protection due to their vulnerability to the effects of the great recession (Verick and Islam 36).

Many policy responses in developing countries have been sector-specific and touching on businesses and public expenditure. Few policies touch on particularly vulnerable groups like youth, migrant workers, and public sector employees, as well as the informal economy workers.

As a result, the policy effects stimulate economic growth, but they do not immediately affect the most vulnerable groups. This creates an illusion of governments failing to do everything that is required to protect the welfare of the citizens.

It also explains some of the dissatisfaction with governments, as expressed through strikes in developing countries and different groups of employees demanded wage increases or reduction in the cost of living.

At the time of the great recession, many central banks introduced new credit facilities to ensure that their countries’ financial sectors had sufficient access to liquidity.

Central banks continued to increase their balance sheets from 2009 onwards, as they bought more assets from financial institutions to provide them with sufficient liquidity. However, their approach was gradual, unlike the immediate response during the 2008 financial crisis (Carvalho, Eusepi and Grisse 4).

An analysis of many stimulus packages by governments does not differentiate between tax cuts and public expenditure.

In the first case, the government provides more funds to businesses and individuals by reducing their tax obligations. In the second part, governments increase their expenditure in the economy to stimulate economic activity, mainly the demand for goods and services (Carvalho, Eusepi and Grisse 5).

The adoption of monetary and fiscal policies by authorities in response to the great recession was mainly endogenous. Decisions relied on external expectations on central banks to stabilize financial markets and the economies of their respective countries (Carvalho, Eusepi and Grisse 6).

The external sources of expectations included the banks and non-governmental organization concerned with policy advice and implementation at the national level.

At the same time, stabilization efforts were aimed at influencing microeconomic circumstances facing individuals in an economy, such as the availability of employment and demand for goods and services (Verick and Islam 40).

The United Nations notes that currency challenges are the biggest threat to policy implementations in developing countries (xvi). They can derail the outcome of the policy and cause the country’s exports to remain uncompetitive.

Dependence on global trade also comes as a disadvantage because other countries limit their imports as part of their responses to the great recession.

On the other hand, developed countries have to grapple with the unwillingness of policymakers to go for structural choices that create permanent shifts and use unpopular options.

Instead, they are likely to succumb to pressure from the electorate and financial lobby groups to create short-term policy changes that favor existing conditions and spell doom for the future.

After being bailed out by their more capable neighbors, countries in Europe are likely to enter into austerity periods where they avoid too much expenditure.

This can lead to reduced overall economic activity and increase the burden of government provision of social services. However, governments at the same time face resistance from the public on any action meant to raise revenues through increased taxation.

The United Nations calls for a pervasive and well-coordinated global plan for dealing with the effects of the great recession. It calls for an increase in short-term fiscal stimulus programs by countries most affected by the great recession.

The main reason for the support of the additional economic stimulus packages that rely on taxation policies of governments is that there are weak private demand and high unemployment rates. F

or developing countries, the situation is different as their main concern is to prevent a rise in food prices and handle volatility in commodity prices and exchange-rate stability (United Nations xviii).

Unfortunately, with the current response model, the only global coordination among countries in their policy responses is discussions in global forums. There is no tangible coordinated action among countries. Instead, every country goes on to implement its stimulus package, according to the domestic needs.

The reliance on domestic conditions affects the global balance of trade and policy and causes additional problems for countries in their exchange rates. Therefore, the United Nations wants countries to look beyond their domestic problems of unemployment and keep commodity prices low.

Countries should work with other countries or blocs to have a better exchange rate stability that will allow them to achieve their domestic goals (United Nations xix).

Meanwhile, Verick and Islam (42) explain that it is difficult for developing nations to rely on the trickle-down benefits of policies implemented by the G20 countries.

The systematically coordinated fiscal responses by developed nations will not create quick effects on the global scene to allow developing countries to reach their recovery goals fast.

The developing countries still have to grapple with their lack of social protection structures that can ensure the unemployed and the poor do not remain susceptible to the enormous costs of the global recession.

The International Monetary Fund (IMF) shows that responses to the great recession involved a mix of tax cuts and spending in the global nine largest economies. Even though the size of the stimulus package was large, it was not enough to offset economy output gaps caused by the recession.

Another finding was that delay in implementing the policies led to reduced chances of closing the jobs gap created by the recession (IMF 3-5).

Specific interventions in high-income countries on sustaining high employment levels in their economies were as follows.

The first intervention was to provide training for the people threatened by layoffs and those who are unemployed. The other solution was work sharing, while the third intervention was to increase public employment services. They included job search assistance and job/wage subsidies.

Most countries did not implement public work programs because their labor markets were less responsive to such interventions, as they relied more on private enterprise participation. This made the other interventions more popular (Verick and Islam 44).

Unfortunately, only countries that enjoy the high-income status also have the highest ability to implement labor relevant policies. As incomes decline, the financial constraints for implementing such policies also set in.

As a result, many low and middle-income countries can only rely on training as a policy response to ensure that a large number of citizens remains employable, in addition to reducing economy-wide effects of the recession.

In countries that were most affected by the great recession, firms that were most affected tended to participate most in lobbying for the inclusion of favorable provisions in their countries’ stimulus packages.

According to the research by Adelino and Dinc, the effect of lobbying for the implementation of stimulus packages was skewed in favor of the most active firms in the lobbying process (257).

The effect of this was that the stimulus package implementation in some sectors did not provide full recovery of all firms; instead, it created competitive advantages for some firms over others.

Supporting evidence on the effect of lobbying and allocation of support in stimulus package came from Adelino and Dinc, who showed that the allocation of stimulus funds was correlated to stale-level economic distress, but weakly (258).

Instead, it strongly associated with congressional politics. Therefore, non-financial institutions that were the most active in lobbying the US Congress for assistance got the most out of the stimulus packages in the United States.

The goal of the Stimulus Act of 2009 in the United States was to increase federal investments so that there would be a subsequent decrease in overall unemployment in the country.

However, the differing effects of the recession on some sectors of the US economy and the predominance of the sectors in some states more than others also ensured that there was skewed application of the stimulus package (Adelino and Dinc 264-265).

Other than lobbying, in any country, firms can appoint politically connected directors or increase their campaign contributions for a political party that wins elections and provides favorable treatment to the firm or the sector (Adelino and Dinc 270).

Supplying credit was a major intention of the various stimulus packages developed by states. In the classical economics sense, an increase in credit does not influence asset prices. According to Mian and Sufi, the great depression was caused by an outside shift in the supply of credit from 2002 to 2006 (55).

The main reason for the outside shift was the global imbalance in savings. There were also subsidies for mortgages through government home ownership initiatives. At the same time, the research by Mian and Sufi showed that companies in the US mortgage industry increased their campaign contributions significantly (55).

The contribution likely affected voting behavior in the Congress. In relation to that, representatives from the most affected constituencies voted for various bailouts for companies in the mortgage and financial industry.

This finding increased support for the claim that microeconomic indicators played a role in influencing decisions on the distribution of economic stimulus packages.

However, the participation of firms and political leadership in decision-making affected the reliance on economic fundamentals in allocating funds and intervention measures.

The availability of microeconomic data on many economic sectors helped to shape the stimulus package in many countries. Governments could pinpoint the expected responses of industry and firms when allocating assistance.

For example, employment numbers in small and medium enterprises in a particular economic sector could tell the severity of the recession on the sector and the opportunity of recovery presented by a particular intervention.

In such cases, increasing training or providing job sharing opportunities could work based on data showing consumer spending, borrowing, and repayment burdens.

Conclusion

The highlights of this paper are that the governments that were affected most by the great recession responded to domestic circumstances before evaluating the existing options in a globally coordinated policy response.

There was a big difference in the response approaches adopted by the high-income countries compared to those taken by the low-income countries. For instance, most of the economic activities in high-income countries are formal.

It was easy for governments to collect relevant data about employment and causes of employment or unemployment rate fluctuations.

An increase in unemployment was caused by reducing demand for labor, which arose out of reduced demand for goods and services. Thus, a cyclic relationship existed in the microeconomic conditions affecting economic performance.

Focusing on one aspect without taking measures to control other economic conditions creates short-term solutions and long-term systematic problems. Based on analysis and advice from various super-national organizations, a globalized outlook is important, even when responding to domestic economic problems.

For example, the global effect of trade on the world currency exchange affects the affordability of goods and services in an import-reliant country. This goes on to affect demand for capital or labor as substitutes in the production process.

Thus, when a country is seeking to increase demand for in a particular sector, it has to consider the ongoing dynamics of its economic policies and those of other countries.

Lastly, this paper shows that domestic policy interventions after the great recession depended on the amount of the supply and demand for their goods and services in various sectors, which also affected their demand and eventual allocation of funds from economic stimulus packages.

Works Cited

Adelino, Manuel, and I. Serdar Dinc. “Corporate Distress and Lobbying: Evidence from the Stimulus Act.” Journal of Financial Economics 114.2 (2014): 256-272. Print.

Carvalho, Carlos, Stefano Eusepi, and Christian Grisse. “Policy Initiatives in the Global Recession: What Did Forecasters Expect?” Federal Reserve Bank of New York: Current Issues in Economy and Finance 18.2 (2012): 1-11. Print.

IMF. The Size of the Fiscal Expansions: An Analysis of the Largest Countries. Washington, DC: International Monetary Fund, 2009. Web.

Mian, Atif, and Amir Sufi. “The Great Recession: Lessons from Microeconomic Data.” American Economic Review 100.2 (2010): 51-56. Print.

United Nations. World Economic Situations and Prospects 2012. New York, NY: United Nations, 2012. Web.

Verick, Sher, and Iyanatul Islam. The Great Recession of 2008-2009: Causes, Consequences and Policy Responses. Discussion Paper. Bonn: Institute for the Study of Labor, Germany, 2010. Web.

The great economic recession is a period marked by persistent decline in the economic growth of different countries across the globe with the Gross Domestic Product (GDP) contracting within a period that is not less than six months. The 2008-2010 great recession affected the global economy and it arose from the developed economies in the world.

This period is marked by high levels of unemployment, decline in retail sales, real income, GDP, slow growth for businesses, and stagnant wages (Altig Fitzgerald and Rupert 66). When there is high unemployment rate, housing prices decline because of the inability of consumers to meet their obligations.

A normal recession does not last longer than a year but the great recession does, and it is milder than an economic depression. Due to its effects, it is necessary to avoid the great recession at all costs through various measures as discussed in this paper.

An economic recession can be avoided through various measures undertaken by the government given the causes of the recession. To begin with, the central bank or the Federal Reserve should increase the level of liquidity in the economy by pursuing expansionary monetary policies. This involves increased supply of cash in the economy through overnight market operations and reduced interest rates.

A recession is caused by reduced level of consumption in the economy. Therefore, an increase in the supply of liquidity will increase the purchasing power of consumers thereby stimulating the level of production in the economy. This will reduce unemployment while increasing output and economic growth.

The recession can also be avoided by pursuing an expansionary fiscal policy such as increased government expenditures in various sectors of the economy. Such type of a policy would see the government reduce the level of unemployment while increasing the purchasing power of the public.

This will stimulate the level of productivity while leading to economic growth and ending the recession. In addition to increased spending, the government can end the recession through bailout of bankrupt institutions especially the financial institutions that do not have enough credit for lending out to borrowers.

The economy can avoid the great recession through adjusting the bank interest rates according to the projected economic situation. High bank interest rates discourage investors from borrowing and hence the money circulation in the economy decreases.

By reducing interest rates, banks will increase the rate of borrowing and investments since more investors will borrow more funds. This will also encourage payment of bank loans. The government should set an interest ceiling and floor to be applied by commercial banks. This will bring an end to the recession experienced within an economy gradually.

An economy should maintain equilibrium in the balance of payment (BOP), which is the graph showing the trade between a country and the other countries across the globe. To avoid the recession, exports should balance with the imports or even exceed the imports. When imports are in excess, it means that imports are cheaper than the domestic products hence there is excess demand and flow of foreign currency causing economic imbalance in the country.

This leads to unemployment because the products produced by the domestic companies face a low local demand as compared to imports (Tcherneva 120). Therefore, increased imports could end the recession since the high level of exports increases production, reduces unemployment and promotes economic growth.

Works Cited

Altig, David, Terry, Fitzgerald and Rupert, Peter. Okun’s law revisited: should we worry about low unemployment? Economic Commentary. Cleveland: Federal Reserve Bank of Cleveland, 1997. Print.

Lee, Jim. “The Robustness of Okun’s Law: Evidence from OECD Countries.” Journal of Macroeconomics 22.2 (2000): 331–356. Print.

Tcherneva, Pavlina. “Permanent on-the-spot job creation—the missing Keynes Plan for full employment and economic transformation.” Review of Social Economics, forthcoming 2.1 (2011): 112-127. Print.

There is no doubt that the crisis of 2008 has shaped the existing economical landscape a lot. Leading to the bankruptcy of a number of companies, it made the U. S. entrepreneurships reconsider their policies and established only-the-strong-survive principle as the key strategy for the America companies in 2008.

Although the U. S. Fed could have given a second chance to the famous Lehman Brothers Company by bailing the firm out, the chances were never taken. Hence, the Lehman Brothers have gone completely bankrupt.

In a retrospective, however, the Lehman Brothers could have hardly been able to fight the financial crisis in 2008 efficiently even with the help of Federal Reserve, which means that in the case the company would have stayed afloat, they would have not been able to offer people sufficient help anyway, being almost broke themselves.

Taking a closer look at the financial situation in which the Lehman Brothers was in 2007, one must admit that the company was not doing well, according to what MacEwan and Miller say. Therefore, it is rather questionable that a loan from a bank could save the day; rather, it would serve as the means to keep the company afloat for a while, yet it would not make Lehman Brothers prosperous again. As MacEwan and Miller explain,

Lehman Brothers, Bear Stearns, Citibank, and others all held large amounts of these assets on their books. So, as the housing bubble burst, as many homeowners failed to meet their mortgage payments, and as the value of CDOs and credit default swaps fell, many banks (including some of the largest banks) saw a sharp decline in the overall value of their assets. (MacEwan and Miller, 107)

Hence, it can be considered that there was hardly any chance for the company to survive the crisis. The main problem of the Lehman Brothers was that the bank depended on the Fed much more than it was required. In its turn, the Federal Reserve followed the policy of the housing bubble (Fox), which can be defined as a run-up in the prices for housing enhanced by the certainty in future stability.

Resulting in the rapid decline of the Federal Reserve’s progress, the given policy must have been considered the only legitimate course of actions in the situation when the economics was gripped by crisis. On the one hand, the given approach seems rather reasonable, given the fact that creating the housing bubble helps spread the belief in strong economic system among the population.

On the other hand, the downside of the give strategy is that, while people believe that the crisis will not last long, the poor state of economics and the rapid increase in price for housing will finally lead to a financial collapse. According to what Friedman, Moseley and Sturr claim,

The housing bubble was in part generated by the Federal Reserve maintaining low interest rates. Easy money meant readily obtainable loans and, at least in the short run, low monthly payments. Also, Fed Chairman Alan Greenspan denied the housing bubble’s existence — not fraud exactly, but deception that kept the bubble going. (Friedman, Moseley and Sturr 133-134)

Taking into account the given information, one must admit that the Lehman Brothers’ impact on the financial situation within the state was rather small. Because of the scale of the crisis, it was quite doubtful that the bank would handle the complexities within its own structure and policies, not to mention having a tangible effect on the state economy.

Hence, it can be concluded that even if the Fed bailed the Lehman Brothers out, the housing bubble would have ultimately led to the financial instability. The Great Recession seems to have been spawned not by the inability for entrepreneurships to get investments, but from the existing housing policy.

In addition, the critical state of affairs in the sphere of finance and economics in the USA should be mentioned: “It has become commonplace to describe the current financial crisis as the most serious since the Great Depression” (Friedman, Moseley and Sturr 135). It can be alleged that the economical situation in which the USA was trapped in 2008 was quite close to the one of the 1929, known as the Great depression: “So we reap the whirlwind with a market collapse building to Great Depression levels.

Once again, we learn history’s lesson from direct experience: capitalist financial markets cannot be trusted. It is time to either reregulate or move beyond” (Fridman, Moseley and Sturr 132). Naturally, the fact that the U. S. economics was collapsing did not improve the Lehman Brothers situation. Judging by the above-mentioned, one must admit that the USA economics was way too unstable for the Federal Reserve to take risks by giving the loan to the company which could have been broken by the end of the crisis (Palley).

When considering the reasons behind the decision of the Federal Reserve to refuse to give the Lehman Brothers the loan which the company needed, one must admit that the Fed was impacted by the problems within. The fact that the Fed was suffering from the crisis was the main reason, while the fact that the Lehman Brothers lacked trustworthiness happened to be the pivoting point in Federal Reserve strategy.

To Lehman Brothers’ credit, one must mention that the company did have certain opportunities to improve their financial situation with the help of the Federal Reserve’s investments.

According to the existing evidence, there have been several attempts to bring the company back to life, along with the endeavors of Bear Sterns: “The precedent for preventing the failure of a large financial institution, initiated with Bear Stearns, now appeared to be reinforced by the Fannie Mae and Freddie Macactions” (MacEwan and Miller 110).

Still, no matter how sad this can seem, the given approach has had little effect: “Yet, while the precedent seemed very clear on September 7, the federal authorities failed to follow it a few days later when Lehman Brothers, the nation’s fourth largest investment bank, moved toward collapse” (MacEwan and Miller 110).

Fighting against the odds, Lehman Brothers tried its best to stay afloat. It must be admitted, however, that at that point, the company could hardly have any impact on the economical state of affairs within the country. Judging by the fact that the Lehman Brothers could not handle its own financial issues, it is hardly believable that the company could have had any effect on the financial processes. Hence, even if the Federal Reserve offered the bank the required loan, the collapsing Lehman Brothers would not have been able to save the day.

Therefore, it is clear that even with Lehman Brothers receiving the help of the Fed the outcomes of the crisis would have still been deplorable. Although it is quite questionable whether the company would have had the power to adjust to the situation which the U.S. market faced in 2009, it would still have taken too much time to adjust to the changes in the economics.

Hence, Lehman Brothers would not have been able to offer people a full range of their services. Even though Lehman Brothers had already lent a considerable amount of money from the Federal Reserve Bank, the former would have been able to pay the bank back with the revenues which they would have obtained from the future financial operations.

However, the Fed did not trust with the company that had already been in debt by the point at which the crisis peaked. Therefore, it seems that there is no one to blame in the given situation; it was Federal Reserve to decide whether to trust Lehman Brothers, and the bank’s decision is not to be judged by anyone except its members.

In addition, the fact that the company was facing its own crisis is worth bringing up as an argument that the Federal Reserve would have only postponed the process of the company’s regress. Even if Fed had provided the required amount of loan money, Lehman Brothers would have already been dead and gone by now, which means that the recession would have been in progress even if the Lehman Brothers still provided their services.

Works Cited

Fox, Justin. “A Random Walk from Paul Samuelson to Paul Samuelson.” The myth of the Rational Market: A History of Risk, Reward and Delusion of Wall Street. Ed. Justin Fox. New York, NY: Harper Collins Publishers, 2009. 60-74. Print.

Friedman, Gerald, Fred Moseley and Chris Sturr. The Economic Crisis Reader: Dollars and Sense. Armonk, NY: M. E. Sharpe, 2011. Print.

MacEwan, Arthur, and John A. Miller. “The Emergence of Crisis in the United States.”Economic Collapse, Economic Change: Getting to the Roots of the Crisis. Ed. Arthur MacEwan and John A. Miller. Armonk, NY: M. E. Sharpe. 65-117. Print.

MacEwan, Arthur, and John A. Miller. “Globalization and Instability.” Economic Collapse, Economic Change: Getting to the Roots of the Crisis. Ed. Arthur MacEwan and John A. Miller. Armonk, NY: M. E. Sharpe. 119-159. Print.

Palley, Thomas I. From the Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics. Cambridge, UK: Cambridge University Press, 2012.

Introduction

Stock exchange is the standard model aimed at providing amenities to the stock brokers and any other interested party in any trade. It provides them with information concerning the emancipation of securities, and any other pertinent business need like income rose from payments and dividends.

Recession, on the other hand, is the reduction in the economic activities, in any business cycle. During such times, the economic indicators such as the GDP, households’ incomes, rate of employment and unemployment, investments, assets and inflation adjustment either upward or downwards (Cohen, 2011 pp.34).

Such situations arise when there is a rarity in stock or when a valuable economic factor busted leading to a decrease in the amount of spending, in a country. In the United Kingdom recession occurred in 2008. It has different effects on the stock exchange market.

Aims/ purpose of the research

The Main objectives of the study are to

1. Identify effective strategies used in identifying the effects of depression on the stock exchange

2. Establish a convenient way of getting the information in the process of obtaining the information

3. Investigate the main effects of depression on the London stock exchange

Aims

1. To identify the most effective way of obtaining the information required with respect to effects of recession

2. To evaluate the role of the recession in the trends in the, London stock exchange market

Questionnaires

1. What is recession?
2. What are the effects of recession on GDP?
3. Does recession affect the process of the stock in the market?
4. Does recession affect the market volatility of the stock exchange?
5. What are the effects of recession on small businesses?
6. Does recession affect the credit valuation?
7. Is recession the cause of the layoffs and reduction in the benefits of the workers?

Contextual context

The recession affected the income stock exchange market in London, but the households did not think this case as the government shielded them. This is evident through the household income of the households two to three years after the economic regression in UK (Peterson, 2009 pp. 98).

The UK government cut down on the amount that it usually allocated to the public for spending and end at raising the amount of taxes collected in a financial year. However, this might have an impact on the household incomes and will depend on the economic growth returns. This is because its fiscal balances are quite complex. It lies between those countries where they might be affected by the regression strongly.

This is as they try to increase their tax collection and those that support a healthy financial stability. The advantage that the UK has is that it had recorded an increase of 8% in its GDP from 2007 to 2009.

The recession affects the stock market transactions in different ways. The most profitable stocks are the ones that seem not affected by the recession. However, as the economy begins to stabilize the growth stocks recover faster than the most productive stock. It is in this effect that this study has to be done to evaluate the effects of depression on the stock market analysis (LaBonte, 2011.pp 94).

People who earn low wages are at more threat of losing their jobs compared to those who earn more wages because the average amount of income a person goes up. The elderly were the luckiest ones because they certainly cushioned by the individual insurance companies. This takes long before it realizes it, and it might take 5 to ten years before it discovered.

Methodology

The most effective way to evaluate the effects of depression on the stock exchange market will be the use of questionnaires and doing a study to examine the effect it has on the stock exchange by focusing attention to banks, GDP, and the impact on the income of individuals (Schwartz, 2005 pp. 21).

Plan of action

The research study approximately one year from may 2009 to may 2010. It will involve research on the ways that the recession affects the exchange market. The next step is the formulation of questionnaires, and distributing them to the research stations.

Findings

The productivity in the United Kingdom reduced as the recession was in its early stages. This was because of completion for the limited supply of resources that was not enough for the competing parties. After a short term, the presentation began rising again. This is because partners who are not financially stable give up leading to a decrease in the competitiveness of different resources needed for the production of goods and services (Townsend, 2010.pp.45).

The main effect recession is the dropping of weaker partners is the variability in the amounts of profits gained by each of the remaining companies. This means that there will be no difference in the profits gained. Therefore, one of the companies will be on the receiving end while the other one will be gaining fewer profits remarkably.

Recessions paves way to the creation of merges with the goal of reducing the competition from a tougher competitor. These mergers not formed with the aim of improving the production or service delivery, but with the goal of reducing the amount of profit gained by one of the competitors.

This will have a tremendous impact on the economy because mergers tend to collaborate and end up with ways of making more profit without putting into consideration other economic factors. This means that the ones to benefit from the mergers are the partners while the people are the ones at the most receiving end where they pay for the cost of production and any other expenses (Truman,2006 pp.35).

Stock prices

The stock prices usually subside when there is a recession. This is because those who are holding shares and who have made investments in any stock will sell their shares. This is because they are afraid of the investments that are highly volatile. They will fly to the other investments like treasury bonds.

The result of all this is a reduction, in the stock market. This, in turn, reduces the efficiency and profits raised by the businesses. The company then forced to lay off some of its workers enough to the low number of profits gained. As a result, the recession grows even worse as most of the people rendered jobless (Geert, 2009 pp. 56).

Decreased dividends

The fall in the stock prices of any company will undoubtedly lead to lower income for the shareholders and any other party involved in with the company. The shareholders will receive lesser amount of money because earnings that the company gets in the form of profits. The shareholders confidence and trust in the company will unquestionably reduce, and some might even stop and sell their shares. As a result, this further lowers the stock market into other recession.

Market volatility

The stock market seriously affected by the prevailing economic situations in any country. It either moves up or down making the investors exceptionally keen on the future trend of the stock market. When a recession is still ongoing the investor’s position is extremely suspicious and, instability in the stock market analysis is even lower that the normal volatility.

This means that there are more risks for the investors as they have to be optimistic, but not sure of gaining anything from their investments. The instability in the market reduces the average returns from the investments (Rhodes, 2011.pp.45).

Investors are likely to run away from investments that are risky and rush to investments that are more likely to generate profits. As a result, there is a reduction in the investment, in any stock market, that seems to be riskier than the others. Therefore, this follows a decrease in the overall value in the stock market trading.

As the revenues and profits fall in the stock market, the business owners and manufacturers will want to reduce workers to be hired. Some might even cut off hiring of new employees. Lack of enough money may force the company to reduce the money set aside for further investments.

Research and advertising may be reduced or stopped carefully to reduce the amount the method used in the expenses. This will certainly have an impact on the other businesses, small or large, which used to satisfy the company or organization with different materials (Winfrey, 2008 pp90).

Credit impairment and failure

Account receivable also affected during recession. This occurs when the people who owe the company pay debts in small amounts, parts and others might not even pay any of the money. This will have a significant effect on the company as it might also not be able to pay its bills on time.

It may pass it on smaller figures or might not even be able to pay it at all. A decrease in the amount of money paid to the companies’ debtors is the violation of the credit agreements that they had signed. This leads to a decrease in the company in the position or conviction of the corporate debt and would not possibly receive credit from them in the future. The company will also find it difficult to maintain servicing the moment that will amount from the bill it has to pay (King,2009. Pp. 109).

This continues to destroy the credibility of the company further. The company might be forced to go to the table to renegotiate the terms that need to be used in the repayment of the charges that borrowed earlier.

In case of a failure to renegotiate new terms with the debtors, the company might be in the possibility of going bankrupt. This might push it to go into reorganization or even stock parts of its shares to new partners in an effort to make it out of the crisis. In other cases, the enterprise or enterprises might be forced out of the business totally (Majmundar,2006.pp. 34).

Lay offs and reduction in benefits

People will have to be laid off by the business enterprises in order to be able to pay them. This will drive the workers to do more work than normally done. The productivity per worker will acquire, but they might be demoralized due to a lot of straining as they work overtime, work harder and all this not compensated as there are no additional funds to increase their wages.

The companies directors and shareholders and the workers unions might be forced reduce the wages of their workers or decrease in the remunerations to its workers. Plants may be shut down, and others that are not performing up to the required standards might be discontinued (Dunnan,2008 pp.48).

Quality of products

A decrease in the funds available for the company to maintain its operations smoothly may force the company to produce sub-standard goods. This might lead to a decrease in the desire of consumers to continue using the companies’ services or products. This will also affect the company negatively as it will display few sales. The most common form of this approach is the reduction in size while its price remains constant or even increase. This forces the consumers to look for other better alternatives.

Effect on consumers

Recession forces the companies or businesses to cut down on the money to set aside for the advertisements and marketing. As a result, of the decrease in the advertising and marketing by the company the confidence that consumers have in the company will decrease as they might need it as a sign of a drop in the company’s production of quality products.

The consumption of the products reduces according to the company’s earnings, and not according to its productivity. This is because consumers view marketing and advertising as a measuring order to determine how a company or organization is doing. Therefore, lack of advertising by a company leads to the negative view from the consumers (Gregg, 2010 pp. 29).

Access of products to consumers

The recession has a profound impact on the small enterprises. This is because the small companies or businesses do not have enough money in reserves to protect themselves from the economic Impact during times of recession. They are at a higher risk of bankruptcies and termination of the businesses due to the little assets at their disposal.

This further worsens when their limited resources assets required getting loans from banks. This does not only affect the performance itself, but also the residents of the hood located. Bankruptcies and business dissolutions kill the spirit of entrepreneurship and no one can risk venturing into a company or organization that is at the risk of failure or termination. The entrepreneurs cannot afford to risk borrowing loans to fund (Geroski, 2010 pp. 45)..

The stock exchange market in London suffered a lot during and after the recession period. The number of people interested in the business investments reduced significantly due to the risk of losing the money they invested into the businesses. Even, though, London was not baldy affected by the recession like the other cities in the world, it is yet to be seen whether the situation will change. However, the situation expected to increase in the coming years as the recession time comes to an end.

Conclusion

The effects of depression can take many years before it can be fully overcome. This is because the consumers and many other employees have either lost faith in the exchange. Unemployment rises as the companies try to alleviate it selves from the effects of the recession. The loss of jobs and low sales and profits by the companies and consumers leads to a decrease in the GDP.

The situation can be remedied by the increase in the collection of tax and reducing the privileges of some people. As the United Kingdom government strives to ensure that the recession does not affect the households, banks are because people are not paying the money borrowed.

This has forced foreign investor to leave and left banks faced with the threat of liquidity. The banks, on the other hand, are the sole lending institution and most of the companies depend to make the necessary capital for investment. This meant that the London stock exchange market was recording negative sales. This was because most of the investors lacked the necessary capital and the possibility of losing all their investments in case they put in money into any business ventures.

List of references

Cohen, N. 2011. UK recession deeper than first thought. London: Financial times. Dunnan,N.,2008. Recession-Proof Your Financial Life. Oxford: McGraw-Hill Professional.

Geert, L., 2009. My first recession. New York: V2_ Publishing.

Geroski, P., 2010. Coping with recession: UK company performance in adversity. Cambridge: Cambridge University Press.

Gregg, P., 2010. Coping with recession: UK company performance in adversity. Cambridge: Cambridge University Press.

King, S.,2009. Lessons from the recession: a management and communication perspective. Bombay: SUNY Press.

LaBonte, M., 2011. Recession, Depression, Insolvency, Bankruptcy, and Federal Majmundar, M.,2006. Assessing the Impact of Severe Economic Recession on the Elderly: Summary of a Workshop. Oxford: National Academies Press.

Peterson, G., E., 2009. Changing domestic priorities series. New York: The Urban Institute.

Rhodes,D.,2011. Accelerating Out of the Great Recession: How to Win in a Slow- Growth Economy. Sydney: McGraw-Hill Professional. Bailouts.Washington: Capitol Net Inc.

Sanderson S., K., 2007. Lessons from the recession: a management and communication perspective.London: SUNY Press.

Schwartz, C., 2005. Recession as a policy instrument: Israel 1965-1969. Frankfurt: Fairleigh Dickinson Univ Press.

Townsend, R.,2010. The impact of recession on industry employment, and the regions New York: Taylor & Francis.

Truman F.,2006. Why wages don’t fall during a recession.New York: Harvard University.

Winfrey. A.,2008. The Recession: Recession Proof. London: Winfrey Incorporated.

Abstract

This paper analyzes the article of McFall (2011) that explores the impact of sudden changes in wealth on the retirement plans of Americans. The results of the study indicate that the crisis-caused decrease in wealth encourages people to postpone their retirement. The article appears to be violating a number of academic writing rules, as described by Ann Johns (2011). Still, at the closer look, it becomes apparent that the key features of the article include clarity, transparency, avoidance of plagiarism, clear navigation, and appropriate usage of metadiscourse, which makes the described article consistent with the modern view of academic writing. The “vision of reality” of the author appears to correspond to the one that is maintained by the discipline of economics. The deviation of the article from the framework described by Johns (2011) stems from the fact that McFall (2011) does not find it necessary to be distanced from the study.

Main Body

The article by Brooke McFall (2011) is devoted to defining the impact that a crisis can have on retirement plans; the data used in the study describes the lives of Americans. With the help of the 2008 surveys, the author was able to estimate the relationship between the two phenomena. The author reports using the “sustainable consumption” metric as described by Purvi Sevak and proceeds to describe the calculations and the results that have been presented in the form of tables extensively. Discussing the results, the author points out that the study contributes to the understanding of the impact of the sudden changes in wealth on postponing retirement that, as expected, turned out to be tangible. The author also found out that the Americans who had pessimistic expectations concerning the crisis were more likely to postpone their retirement.

Article Analysis: Key Features

According to Johns (2011), discourse is used by communities to “to keep in touch with each other, carry on discussions, explore controversies, and advance their aims” (p. 503). To achieve these aims, particular features are expected to be exhibited by the works of every discourse member. The features that are expected from academic writing are going to be described in this paper, and their presence in the article of McFall (2011) is going to be evaluated.

The primary requirement of academic texts is explicitness (Johns, 2011). This term incorporates qualities like transparency and clarity, objectiveness, and avoidance of ambiguity. To demonstrate this feature and its implementation in the article by McFall (2011), other, more particular features should be analyzed.

Article Introduction

The article is introduced with the discussion of the factors that have directed the author towards conducting the research. Then the author proceeds to describe the study, its aims, methods, and results. Such an introduction is typical for academic discourse and ensures clarity and transparency of the work (Johns, 2011). Such a layout demonstrates that the work is meant for the academic community; the language used in the introduction indicates the same.

Specialized Language and Assumptions about Audience

Beginning with the heading, the author uses the kind of vocabulary that can appear foreign to academic work. The title includes the phrase “crash,” the introduction sports the words “housing bust,” “shock,” “plummeting” (McFall, 2011, p. 40) that can be described as emotionally colored and, therefore, would not be typically expected to appear in academic writing (Johns, 2011). However, if one explores the vocabulary of a microeconomics textbook, for example, that by Lieberman and Hall (2012), these expressions will be described as terms. For example, to explain the meaning of the phrase “housing bubble,” Lieberman and Hall (2012) point out that the “term bubble suggests something that is destined to burst” (p. 110). While the origin of such terms is obviously metaphoric, the discipline appears to have incorporated them along with the more “conventional” phrases. Moreover, from the explanation of the “housing bubble,” it can be suggested that economists find it convenient that the terms can be explained through their imagery. Therefore, the language used by McFall (2011) includes specific disciplinary terms as well as discipline-typical seemingly emotionally charged adjectives.

The economics terminology that also includes numerous other terms, for example, “total wealth,” “household assets,” “pre cash sustainable consumption level,” “annuitization factor” (McFall, 2011, p. 41 ). Apart from that, the author uses another layer of terminology that is connected to the calculations, for example, “nominator,” “denominator,” “regression results,” and so on (McFall, 2011, p. 41). From the heavy usage of terminology of both layers, it is obvious that the article is meant for specialists.

Metadiscourse and Reader Navigation

According to Johns (2011), metadiscourse is the part of an academic work that serves to provide a “map” of the said work (p. 506). McFall (2011) uses metadiscourse to describe the plan of the work in the introduction as well as to describe the calculations and tables as the instructions to reading them is given. It is obvious that such mapping facilitates the process of reading; apart from that, it should be pointed out that the maps contribute to the transparency and clarity of the work on the metadiscourse level.

Hedging Tactics and Intertextuality

McFall (2011) does not actively seek to utilize hedging techniques. Modal verbs are used not for hedging but in their primary meaning: “annuity that could be purchased in 2009” (McFall, 2011, p. 42). Still, certain suppositions that the author makes, appear to require hedging that is reflected in the phrases: “it is also plausible that”, “the result is suggestive”, “these results suggest” (McFall, 2011, pp. 42-43). According to Johns (2011) hedging techniques are expected to be used in academic discourse for the sake of objectivity.

Intertextuality presupposes acknowledging the sources used by the author; this feature is aimed at avoiding plagiarism (Jones, 2011, p. 509). McFall (2011) cites the source of the data and mentions all the works that have been used to create the present study. In the discussion, McFall (2011) points out that the article contributes to the current knowledge concerning the relationships between changes in wealth and retirement and demonstrates this fact by citing other relevant studies.

Authors Presence

According to Johns (2011) the author of an academic work is expected to distance himself or herself from the study for the sake of objectivity. In the academic discourse, the author is not supposed to be involved in the study personally or emotionally. The easiest way to achieve this on the superficial level is to avoid the use of the personal pronoun, but this is not substantial to achieve objectivity.

McFall (2011) ignores the common techniques of distancing from the work. The author uses the personal pronoun throughout the work: “I use data”, “I provide estimates”, “I follow work”, “I implicitly assume,” “I first calculate” (twice), “I examined” (McFall, 2011, pp. 40-43). At the same time, it should be pointed out that personalized constructions are used by the author as well: “could be purchased”, “is then calculated”, “is calculated» (McFall, 2011, pp. 41-43). In general, it appears that the author uses various sentence structures and utilizes the ones that are most convenient and short. The author also does not avoid evaluating the findings. For example: “this is not surprising”, “it is also plausible” (McFall, 2011, p. 42). Such elements could hardly be described as nonobjective, but they demonstrate the fact that the author is not detached from the study.

Vision of Reality

According to Johns (2011), the vision of reality is a perspective that is shared by the discourse community. This term appears to be very similar to that of “disciplinary perspective” as described by Repko (2011): it includes the theoretical, methodological, and thematic preferences of the members of a discourse community as well as “ideological, ethical, and epistemological presupposition” (165). While describing economic discourse, Repko (2011) points out that its members tend to regard the reality perceptible and cognizable. The worldview of McFall (2011) appears to be comparable to these features: the study itself is devoted to exploring the reality and its phenomena. Apart from that, the mentioned linguistic features of the study can be attributed to the “perspective” of the economics discourse.

Conclusion

Since McFall (2011) refuses to be detached from the study, the work could be regarded as a “rebellious” one in the terms of Johns (2011). Still, it should be mentioned that nowadays the scientific word is more accepting of the usage of the personal pronoun which shows that the involvement of scientists in their work is being “redeemed» (Van Way 2007). This may be the case of the discourse evolving and developing as described by Johns (2011). At the same time, it should be pointed out that the key aspects of academic writing including clarity, transparency, intertextuality and avoidance of plagiarism, clear navigation and appropriate usage of metadiscourse are characteristic of the described article. As a result, the work is perfectly objective, and the involvement of the author into the process of the study does not appear to influence the results or their interpretation.

References

Johns, A. M. (2011). Discourse communities and communities of practice: Membership, conflict, and diversity. In E. Wardle & D. Downs (Eds.), Writing about writing: A college reader (pp. 498-518). Boston, MA: Bedford/St. Martin’s.

Lieberman, M., & Hall, R. (2012). Microeconomics: Principles and Applications. Mason, Ohio: Cengage Learning.

McFall, B. (2011). Crash and Wait? The Impact of the Great Recession on the Retirement Plans of Older Americans. American Economic Review, 101(3), 40-44. Web.

Repko, A. F. (2011). Interdisciplinary research: Process and theory (2nd ed.). Los Angeles: Sage.

Van Way, C. W. (2007). On Scientific Writing. Journal of Parenteral and Enteral Nutrition, 31(3), 259-60. Web.