AusterityIn economic policy, austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. There are three primary types of austerity measures: higher taxes to fund spending, raising taxes while cutting spending, and lower taxes and lower government spending. Austerity measures are often used by governments that find it difficult to borrow or meet their existing obligations to pay back loans.
Debt deflationDebt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults and because the value of their collateral falls, leading to a surge in bank insolvencies, a reduction in lending and by extension, a reduction in spending. The theory was developed by Irving Fisher following the Wall Street Crash of 1929 and the ensuing Great Depression.
Panic of 1873The Panic of 1873 was a financial crisis that triggered an economic depression in Europe and North America that lasted from 1873 to 1877 or 1879 in France and in Britain. In Britain, the Panic started two decades of stagnation known as the "Long Depression" that weakened the country's economic leadership. In the United States, the Panic was known as the "Great Depression" until the events of 1929 and the early 1930s set a new standard. The Panic of 1873 and the subsequent depression had several underlying causes for which economic historians debate the relative importance.
Welfare stateA welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity, equitable distribution of wealth, and public responsibility for citizens unable to avail themselves of the minimal provisions for a good life. There is substantial variability in the form and trajectory of the welfare state across countries and regions.
Roaring TwentiesThe Roaring Twenties, sometimes stylized as Roaring '20s, refers to the 1920s decade in music and fashion, as it happened in Western society and Western culture. It was a period of economic prosperity with a distinctive cultural edge in the United States and Europe, particularly in major cities such as Berlin, Buenos Aires, Chicago, London, Los Angeles, Mexico City, New York City, Paris, and Sydney. In France, the decade was known as the années folles ("crazy years"), emphasizing the era's social, artistic and cultural dynamism.
Early 1980s recessionThe early 1980s recession was a severe economic recession that affected much of the world between approximately the start of 1980 and 1983. It is widely considered to have been the most severe recession since World War II. A key event leading to the recession was the 1979 energy crisis, mostly caused by the Iranian Revolution which caused a disruption to the global oil supply, which saw oil prices rising sharply in 1979 and early 1980.
Liquidity trapA liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt (financial instrument) which yields so low a rate of interest." A liquidity trap is caused when people hold cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war.
Credit crunchA credit crunch (also known as a credit squeeze, credit tightening or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from banks. A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates. In such situations, the relationship between credit availability and interest rates, changes.
Sovereign defaultA sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full when due. Cessation of due payments (or receivables) may either be accompanied by that government's formal declaration that it will not pay (or only partially pay) its debts (repudiation), or it may be unannounced. A credit rating agency will take into account in its gradings capital, interest, extraneous and procedural defaults, and failures to abide by the terms of bonds or other debt instruments.
Economic recoveryAn economic recovery is the phase of the business cycle following a recession. The overall business outlook for an industry looks optimistic during the economic recovery phase. During the recovery period, the economy goes through a process of economic adaptation and change to new circumstances, including the reasons that caused the recession in the first place, as well as the new policies and regulations enacted by governments and central banks in reaction to the recession.
