Your parents are not alone in being confused what a recession is. Most people have a guess, but I'll try and help the light turn on inside your noggin!

     A recession, simply, is a period of time when things are generally bad money-wise in our country. A lot of people lose jobs, the stock market takes a big dive, companies don't make as much money and people like you and your parents don't spend as much money on big things like cars or vacations. There's actually a big cycle that a takes place, so sit back and let me yak some more!

     What happens is this: let's say that that something happens that makes people spend less money. What do you think will happen? Well, companies that make products won't sell as many things, will they? Okay, now if they don't sell as much, they won't make as much money, which means their stock price in the stock market will go down. That means that people will start selling their stock, which means that the company is worth less money. That means that the company will have a harder time selling products and even hiring new people and keeping the jobs that they have!

     Hold on, it gets worse. Because the companies don't make as much money, sometimes they have to fire some of their workers. So, you have more people out of work, and fewer jobs for those people to look for. That worries everyone, so all of us cut back on how much we spend even more, which starts this whole thing over again!

     Nobody really knows exactly what triggers a recession, but the things that happened last year on September 11th and afterwards certainly didn't help. A lot of people think that the collapse of all the Internet Companies (remember all of those funny commercials on TV during the Superbowl a couple of years ago? That was them!) helped start the recession we've been in as well.

     So how does our country get out of this spiral? Is there any hope? Well, a couple of things usually happen to jump-start the economy back to where it should be. First, the government will step in and help. Mr. Alan Greenspan and the Federal Reserve will cut interest rates. This helps in three different ways! Companies can take out loans for less money to retool, hire more workers and develop new products. Lower interest rates make stocks look more attractive to investors which starts the stock market going up again. And, low interest rates help people afford things easier, like houses and cars, so folks start buying again. Secondly, low stock prices are tempting to investors looking to make some money, so if a stock price is low, people will start buying it in hopes that the stock will go up.

     It takes a little time to dig ourselves out of a recession, but we have every time so far! So, here's to better days ahead!

Did You Know?

The US has had, counting the current one, 11 recessions since 1945. The average length of a recession is 11 months and none of the 11 recessions has ever exceeded 16 months!