A recession is defined as a decline in a country’s Gross Domestic product (GDP) or negative growth for two or more successive quarters of a year.

Recession is caused by any one or combination of the following factors:

1. Currency Crisis:- This happens when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange.
2. Inflation;- It is the result of a rise in the general level of prices of goods and services in an economy over a period of time.
3. National Debt:- Recession follows when a sovereign government is unable to pay off national debt.
4. Speculation & economic bubbles:- Speculation causes prices to deviate from their intrinsic value. Recession follows when such hyped prices crash.
5. War:- When two or more nations are at war over a considerable period of time, it can prove to be a drain on the economy and can result in recessionary trends.
6. Under consumption:- When there is under consumption it leads to a situation where stagnation will set in as production will be stopped, resulting in recession.
7. Over production:- If there is over production on a large scale, it would lead to the reduction in value of the produced goods, thereby leading to lower prices and unsold stock.

The current recession seems to be the fallout of bursting of Economic (read Housing) bubble and overproduction (read over availability of mortgage credit).

The real estate prices had been growing to astronomical figures due to hyped demand. This hype in demand had been caused by over-availability of easy credit. When there was snap in one of them, the entire bubble burst. Add to that, the continued rise in oil & steel prices and the stage was set for recession in US. The involvement of big players the world over resulted in this enormous recession in the entire world.

The recession in US has been confirmed by a negative growth of GDP. In fact the GDP in US has shrunk 0.5%, the most since 2001 (when the last recession took place).