RECESSION

Recession starts when there is a downward descends from the peak, which is of a short duration. It marks the turning period during which the forces that make for contraction finally win over the forces of expansion. Its outward signs are liquidation in the stock market strain in the banking system and some liquidation of bank loans, and the beginning of the decline of prices. As a result profit margin decline further because costs start overtaking process. Some firms close down, other reduce production and try to sell out accumulated stocks. Investment, employment, income and demand decline. This process becomes cumulative.
Recession may be mild or severe. The latter might lead to a sudden explosive situation emanating from the banking from the banking system or the stock exchange and a panic or crisis occurs. When a crisis and more particularly a panic, does occur, it seems to be associated with a collapse of confidence and sudden demands for liquidity. This crisis of nerves may itself be occasioned by same spectacular and unexpected failure. A firm or a bank or a corporation announces its inability to meet its debts. This announcement weakness other firms and banks at a time when ominous signs of distress are appearing in the economic structure, moreover it sets off a wave of fright that culminates in a general run of financial institutions.