What Does It Mean?

What’s the specific definition of the word “recession”? In terms of the economy, a recession is a marked, significant decline in activity that lasts longer than just a few months. Once a recession has taken hold, its effects are seen across a swathe of vital pillars that hold up an economic framework - employment, income, industrial production, and trade in wholesale and retail. Unfortunately, recession is a fairly normal, regular part of the overall business and economic cycle, although certain major events can trigger a sudden recession. This is one of the reasons for precious metal investment - the unpredictability of the economy.

What Causes a Recession?

Outside of the ebb and flow in the financial world, what can trigger a recession? There are a few events that can kick start a crisis, which is what makes precious metal investment important - many of these are out of our control.

Stock Market Crash

Stocks are the shares of ownership that people invest in a company, and these stocks are traded on the stock market. Like much of our economy, the value of these stocks depends on a great deal of faith and belief in the market - that the stocks are worth something. Should an event come along that causes that faith to waiver, or collapse completely, then the stock market goes with it. In turn, this causes a huge loss of confidence in the economy, sapping the wealth of investors. With less faith in investing, and in new business, global economic growth slows with it.

Rising Interest Rates

The majority of people these days are living under the shadow of some kind of debt, which means they’re also intimately familiar with the importance of interest rates. With enough people in debt, especially when they are struggling to pay it back, then interests rates keep climbing, meaning that liquidity is limited, and investing is reduced. Rising interest rates not only reduce investment, but also borrowing, while increasing the value of a currency to the point where it is no longer competitive (inflation). All of this comes together to cause confidence in the economy to collapse.

Precious Metal Investment as a Safeguard

These are just a couple of examples of what can lead to a recession - we’ll be taking a look at some more in a subsequent blog entry. In the meantime, we encourage you to look into precious metal investment as a safeguard against the possibility of another major recession. Precious metal investment, buying gold or having a gold or silver IRA means that your personal wealth is tied into the steady, reliable value of tangible assets. Contact LCR Coin to secure your future.