What is depression and the effect to economy?

What is depression?

Depression is a significant deterioration of the national economy. The depression left extremely heavy consequences not only on the national economy but also on the jobs and occupations of the people of that country. So what is the depression? What to do to not be unemployed when the depression occurs? Let’s find out with Filipinance.com!


General knowledge about what is the depression?

Depression is a concept that is not new to those who have experienced the most recent economic war in 1997. Do you understand the whole thing, what is depression? What are the causes and ways to prevent it?

What is the full definition of  a depression?

A depression is most simply understood as a situation in which the national economy deteriorates significantly. It is a significant decline in economic activity that has taken place over a long period of time, causing the economy to fall into an increasingly serious situation. An depression is an economic downturn in the business cycle. However, if people know how to manage economic development, manage the recession properly, we can prevent the depression or more or less can limit the worst possible effects.

So what is the most profound understanding of the nature of the depression? The nature of the economic crisis is the loss of direction as well as the stability in the economy, which is a period of recession of the economy. The depression has often begun to germinate a long time ago, so when the depression broke out, the consequences it left on the economy were very heavy. At the same time it is not easy to fix in a short time.

A depression can happen on a national scale, it can break out within the region, but it can also break out around the world. Of course, with that, almost no country can avoid this whirlwind of depressions. A very interesting fact is that the more developed the country, the more likely the depression will occur, followed by the consequences it leaves will also be much heavier when the depression takes place in Philippines. poor countries and less developed countries.

Economic crisis includes three types of crisis namely surplus crisis, shortage crisis and debt crisis. Specifically:

Overcapacity crisis is a crisis in which the quantity of goods produced is high while the demand for consumption is limited, that is, the supply is more than the demand. The surplus crisis occurred much after the British industrial revolution, when machines gradually replaced labor, which caused mass unemployment and no income for workers. Meanwhile, goods are produced more and more and they do not have money to buy those consumer products.

Contrary to the crisis of oversupply is a crisis of shortage, this is a crisis in which the supply does not meet the needs of the people, causing the price of products to escalate. The shortage crisis originates from the rapid population growth, natural disasters, resource depletion, production capacity limitation, etc. The shortage crisis has pushed product prices to escalate, rising to unacceptable levels. .

Finally, we have to mention the third form – the debt crisis. This is a crisis in which the national government is unable to pay its national debts leading to a debt crisis. In order to solve the national debt crisis, taxes are often raised with the financial economic sectors, economic investment in the country to solve the debt problem. Debt crisis is not as dangerous as excess or shortage crisis, the core issue is between creditor and debtor.

What are the causes of the depression?

In most cases, a financial crisis is the cause of a depression. That’s when GDP typically falls, liquidity dries up, property prices and stock markets plummet, and the recession gets worse and worse.

A depression is a situation in which the economy of a country or countries experiences an unexpected recession caused by a financial crisis. A financial crisis is a situation when the demand for money rapidly increases relative to the money supply. In the past, the financial crisis was equivalent to a banking crisis, but today it exists in the form of a currency crisis.

In the late 19th and early 20th centuries, many financial crises took place, which stemmed from banking crises and many other recessions. Other situations that are usually signs of a financial crisis are starting to take place such as stock market crashes and financial bubble bursts, currency and sovereign debt crises, etc. Financial crises lead directly to loss of economic assets, it may or may not affect the economic position of a country depending on the economic crisis that the country suffers.

Many economists have put forward theories about how a financial crisis develops and how it can be prevented. However, there is almost no consensus among the solutions and the financial crisis remains a phenomenon that plays out over time. A stock market crash is an example of a financial crisis that then gradually spirals into a depression.

Classification of depression

Forms of depression include 3 types of surplus crisis, shortage crisis and debt crisis. More detailed classification of edepression is divided into the following types:

  • Banking Crisis: A banking crisis occurs when a commercial bank is suddenly withdrawn by a depositor. Banks today lend money and the source of money they lend is mostly deposits from other customers, so when the depositor withdraws suddenly, it is difficult for the bank to recover their debts to pay. for customers to send money. Therefore, the payment race will take place, causing customers to lose confidence in the bank, lose their deposits and not be guaranteed the amount they have deposited. The most prominent example of a banking crisis is the US Banking crisis of 1931 and the operation on Northern Rock in 2007. Banking crises often occur after periods of risky lending and lead to default.
  • Currency crisis: also known as devaluation crisis, is a part of financial crisis. A currency crisis occurs when the price of money drops rapidly, people have to spend a lot more money to own the product they want.
    “Bubbles” and hoarding speculation: When product cockroaches escalate too high and last for a while because some speculators hoard in the hope of selling pigs at a high price at a later time, causing disruption market. If speculation and hoarding is pushed up like a “bubble”, it is easy to lead to the collapse of asset values. The most prominent example of this type of crisis is the 17th century Dutch Tulip crisis or the Wall Street stock market crash of 1929.
  • Financial crisis – the final push of a large-scale depression. Financial crisis refers to problems in the banking and financial sector especially when a large bank of a country collapses.

These issues continue to take a turn for the worse and it will start to affect the macro economy and things that cover the entire economy, like GDP growth, unemployment, and inflation.

A global financial crisis is a financial crisis that simultaneously affects many countries or affects the whole world. During the global financial crisis, financial institutions and companies lost trust in each other, they stopped lending and stopped buying valuable assets. This is considered the final push to officially take place in a large-scale economic crisis.

However, the financial crisis is not a depression and it is not an economic crisis. Because the financial crisis is limited to one area, the depression affects the entire economy. And the consequences are very heavy such as unemployment increases, GDP stops growing or shrinks, people’s lives are miserable, natural resources are exhausted, … and many other serious consequences.


Economic crises have had a major impact on the world economy

In its history of economic development, the world has experienced many depressions. If you look at the world economic development graph you will see that the graph is sinusoidal, there are periods of peaks and times of declines to the bottom. Those bottoms are marked by depressions. However, the depressions that took place also marked the new beginnings of history or of the world economy. We can mention the depressions that deeply affect the world economy as follows:

  • The Dutch Tulip Crisis in 1637 destroyed the entire Dutch economy, turning the Netherlands from the world’s leading power to a secondary one, opening up opportunities for England to rise later.
  • Bank credit crisis in England in 1772, causing Britain severe economic losses, one of the reasons why this country lost many colonies at that time, including 13 British colonial states in North America. (later United States). This crisis also created an opportunity for the rise of two new economic powers, France and Prussia (later Germany).
  • The Great Depression of 1929-1933 started with the financial collapse of Wall Street – USA. The economic crisis of 1929-1933 is considered the heaviest crisis, leaving the most severe consequences. It affected the entire system of capitalist countries at that time, including Britain, France, and the United States. Germany, … Making the US, although still the No. 1 power, the economy has shrunk a lot. It is also the germ of Fascism and World War II.
  • The 1973 oil crisis between the United States and OPEC members. This crisis left extremely heavy damage only after the great crisis of 1929-1933, it affected the economies of many countries around the world, especially the US and its allies. Along with that, the 1973 oil crisis contributed to the collapse of socialism in the Soviet Union.
  • The economic crisis started in Thailand in 1997 and then spread to East Asian countries, especially Southeast Asian countries, including Philippines, which is also a victim of this crisis. This crisis seriously affects the lives and economies of the countries of Southeast Asia and East Asia.
  • The financial crisis of 2007 – 2008 in the real estate sector started in the US, causing economic recession in many countries and profoundly affecting Philippines. Because of this time, Philippines has just joined the WTO in 2007, but with positive measures, Philippines has overcome the crisis to affirm its position in the international trade and international business market.

What profession to do to “immune” to the depression?

The depression took place affecting all economies and all business sectors. One of the most obvious first consequences is unemployment. No need to wait until the age of 35, just a depression you can become a person without a job. At that time, the competition for jobs became more difficult than ever. So what do you do so that even though the economic crisis takes place, you still have a good life, “immunity” successfully. Let me introduce to you!

Information technology jobs

Information technology is the top candidate in occupations immune to the depression. Regardless of whether a recession occurs or not, in general, computer programmers suffer very little impact. As long as the computer is the center of everyone’s work and daily life, the land of software engineers will still be available, regardless of the economic situation” – quoted verbatim: “Regardless of the recession, computer programmers generally have little impact. As long as computers are the focal point in the work and daily life of people, the land of using software engineers remains, despite the economic situation.”
Jobs in the information technology industry, especially software engineers, are considered a trump card when the depression takes place. Continuing to develop software and information technology systems not only helps to minimize the damage of the depression, but it is also a factor in promoting and recovering that economy. Therefore, jobs related to information technology, especially computer programmers, are considered as immune to the economic crisis.

Choosing information technology will be a field with a stable future of development in the face of any recession or economic growth. Especially when the industrial revolution 4.0 is happening, the role of information technology is increasingly emphasized, the job opportunities in information technology and software are more and more open than ever.

To understand more about today’s information technology job opportunities as well as future development forecast. Through this recruitment channel, you can choose any information technology job, job or profession for yourself.

If you are too tired, go back to grow vegetables and raise chickens…

As mentioned at the beginning, the richer the countries, the more severe the depression will be. The same goes for individuals in the country. One of the economic sectors least affected by the economic crisis is agriculture. However, at present, the economic development orientation along with the view that no longer promotes agriculture as before, many people have followed the trend of the times, ignoring the jobs that have been and are in great need of this high-quality human resource. Especially when Filipinos agriculture is mechanizing the application of science and technology in production and farming.

So you can choose to become an agricultural engineer or simply raise livestock and farm animals. Choose to live a simple life, the poor are not busy with life. A life revolving around pigs, chickens, gardens, vegetables, fish ponds, a life of self-production and self-consumption. A simple, leisurely life mixed with a bit of boredom. But the important thing is that you can stand it!
Depression is a very familiar concept, through this article, hopefully you have understood what is depression? Causes and classification of depression. Especially the jobs that are immune to the depression for your reference and future development orientation.


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