What causes a "recession?"?

I'm trying my best to understand all the news about this possible "recession" but the truth is, I'm very unfamiliar with how these things work. Could someone please explain what exactly it is and how it was caused? Just curious.

A recession technically is defined as two back to back (consecutive) quarters of negative economic growth.

What would spark two quarters of negative economic growth could be various reasons: war, poor housing market, banks over extending credit, government spending, consumer debt, trade, etc. so there are many different reasons.

Basically, good times cause a recession. I know, it sounds screwed up.

Human nature is that if people are getting a hold of easy cash for too long, they get stupid (Ever hear "easy come, easy go?"), corporations get stupid, and a recession happens.

In this case, US real estate kept going up, so people bought more land on leverage assuming this would continue forever. They used the home-equity ATMs, and the banks loved to help, because they were making money up the wazoo as well.

All this "easy money" hid the fact that wages weren't really increasing and good jobs were moving overseas. Eventually, the house of cards crumbled. Without house prices going constantly up, people couldn't pay their debts. People and corporations were stupid. They lived the high life for a decade, then paid the piper.

Similar stories have happened in the past, such as the S&L scandals, the tech-wreck crash of 2000, etc.... Usually, a recession is preceded by corporations and people being stupid because of a long expansion. Easy money brings on recessions.

That's why good economic policy is to "take away the punch bowl just when the party is getting good". This is why the fed increases interest rates during expansion. They know easy money will lead to inflation, dumb lenders, dumb people, and a recession.

-->Adam

Okay, everyone gave you the technical definition of a recession, which you could have pulled from any dictionary, but kinda lacked on what causes them.

Recessions are a natural part of the business cycle. Think of it like you going to the gym. Lets say you pumped iron for 8 hours straight, downing nothing but red bull and power bars, when you head home...you are heading home for a crash. Same with the economy. It runs hot for a few years as consumer, corporate and government spending are running red hot...then the consumer starts to build up a debt. So they stop spending. Now, it generally takes about 6 months for the Corporate world to know that this has happened (this is because it takes about 2 quarters for consumer spending information to be effectively translated to the corporate world). Now while the consumer (who happens to be about 70% of the strength in the economy) backs off, the companies are still shelling out products relative to the information they were receiving before the consumer backed off. So companies have been shelling out products 6 months into a lag and they have been spending like mad during the same time...so, with this new adjustment they make radical cuts to production and spending (usually resulting in job losses). Now not only are the consumers not spending as much, but neither are the corporations...which means the government cant...resulting in an overall GDP drop. So, to stimulate spending and increase employment, the government makes money cheap (lowers the overnight rate) so that corporations will refinance their debts, allowing them to hire people again and increase their spending....and allow consumers to do the same... Then the system starts up again...and then the government increases the overnight rate...which in turn lowers the spending...and starts the whole cycle over again.

Fun stuff huh. Don't sweat this recession. This is poised to be a rough year, but 09 will be better. Moreover, this is the best time to look to invest. With all this selling off, stock prices are dirt cheap. I can't believe how cheap Amgen and Starbucks are!! Its like the day after Christmas sale!!

Technically in an economic language, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.
In other words every time an economy is not expanding it is in recession.

fed chairman bernacle sounds like he just enrolled in freshman economics 101 . i am a casual follower of wall street , and i saw this coming 2 years ago .there is 1.51 Trillion on credit card debt , true unemployment is above 12% , govt borrowing 330 million a DAY from india , china , mexico for war .... forget recession , a major , major depresion is coming soon . this will lead to civil unrest . bush will respond ( as he has always planned to ) with more fascist repression of civil rights . the govt. will disrupt the food supply , by 2012 the great hunger will be upon us . soylent green is people .

Recession just means lack of economic growth. There are different ways of defining it. The most common definition is "2 or more consecutive quarters of real GDP decline".

Basically recessions are adjustments and usually involve people losing their jobs and businesses earning less. Recessions usually ocur because the situation before the recession was unsustainable. For example, if the US consumer more than it produced for several years, eventually there would have to be a period in which people consumed less than they produced to balance thing out.

Democrats in Congress who want to get back BACK at
evil corporations and RAISE their taxes

and have not figured out that WE the consumer - pay all corporate taxes - in the sales price of the item

*****************************
so let's really give the economy a jump start - and have

ANOTHER TEA PARTY

Make April 15 - just another Spring Day and get rid of the I R S

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