After 2022 comes to an end, 2023 will be a significant year for the world’s politics and economy. However, it was intimated that the world will experience an unimaginably severe recession by the middle of 2022. How will this recession fully manifest itself this year, and how will this friction have a stronger impact on our economy?

The world will experience a significant political and economic change in 2023 when the year 2022 finally comes to a conclusion. However, it was intimated that the world will experience an unimaginably severe recession by the middle of 2022. How will this recession fully manifest this year, and how will this friction have a stronger impact on our economy?

When one of the participants in the economic business cycle is impacted, a recession initially develops. This can happen either as a result of a decline in the employment rate, income level, production level, or expenditure level. The primary participants in an economy are the buyer and the seller, or, more formally, households and businesses.

To put this into perspective, imagine that you have a neighbourhood bakery where you may buy bread. The price of the bread is a fixed amount that you pay to the baker, who then uses that money to cover labour costs, income, and other production expenses. Due to the success of the bakery, the owner intends to enhance his assets by investing in more labour, more land, etc. to boost production. The Bakery chooses to raise the price of its goods to cover the costs of manufacturing in order to pay for all of this, however, one day when you go to the bakery you realise the price of the bread has doubled from what it was.

In turn, the customer decides it would be wiser to put this money in a bank and earn a decent interest rate rather than waiting to buy that bread because this makes them feel a little unsure about how to spend their money. The supply-demand chain is eventually disrupted when all of the customers start to worry about this spending. Less consumer spending makes it difficult for companies to cover their costs of production; as a result, they are obliged to let go of part of their employees, which lowers production costs. Since they won’t have any money to spend in the economy after being laid off, the layoff workers’ economic spending eventually leads to this causes a disruption in the business cycle and everyone is affected.

Because of lesser spending, there is lesser production, and because of lesser production, more workers are laid off, because of the employment rate decreasing the consumers get more worried and save more money and this cycle continues and continues until it officially becomes a recession. 

But how does this affect the current world condition as it recovers from the COVID-19 pandemic? The first truly post-pandemic year was 2022 when trade began to resume and public access to air travel was restored. The economic impact that the pandemic had cannot be ignored, despite plans by businesses to get back on track. Numerous fast food and retail establishments had to close as a result of the epidemic, which resulted in millions of jobs being lost and customers spending less and less on goods and services.

Businesses trying to recover from the epidemic fell victim to the vicious cycle as well; they were compelled to terminate numerous employees due to the expected losses they incurred during the outbreak. As a result, many people were forced to remain jobless, which reduced their purchasing power. As the Russia-Ukraine situation grew in intensity, the pressure on oil prices caused consumers to be even more frugal with their spending. Therefore, a recession is something that cannot be avoided given the existing situation.

However, what is the government’s role in all of this? In the United States, it was reported last year that money supply growth had turned negative for the first time in 28 years. While it is not an indicator of an impending recession, it does show how there has been a general decline in economic activity over the last year, and if it continues in such a steady state equilibrium, it will cause more economic damage than anything else. It is past time for the federal government to implement sound economic policies that benefit the market and businesses. If this is not done, the impending doom of the recession will not be averted.