19 March 2022 | csk speaks - education - effective communication - online communication

Impact of the Global Recession 2022 on Startups and Businesses

- How to Tackle the same? -

Inflation means too much money in the hands of people which in turn increases the demand and the supply amount is safe as before. A lot of demand with fewer supplies leads to raising the prices of supply items or things which leads to a lot of money in the money but less purchasing power. To curb inflation, the govt or the central bank will reduce the money supply in the market through their monetary operations and this leads to recession.In a recession, due to a cut in money supply people suffer with less money, and jobs are lost because companies try to handle their profit margins by cutting off the production costs. The economy increased in inflation and became stagnant during the recession period.

The recession is a drop in demand. It happens when there is a surplus of production and scarcity of demand. Markets self-correct this by reducing the market price but when the extent of the surplus and scarcity is much more than the market's ability to self-correct then it's a recession. In a recession, there isn't simply enough money with people to buy and as a result of which companies don't have any incentive to produce since their stockpiles are stagnant in the warehouses. So they start laying off employees causing unemployment as well as a drop in GDP due to decreased production.MA massive drop in prices or deflationist and of d the precursor of a recession, which is why a low rate(2 to 3%) of inflation is usually considered healthy for the economy.

Assumptions behind Global Recessions

These types of global recessions have happened in the past as well and Indian markets and the IT sector came out of it unscathed. However, markets do what they have to do. They are based on models and models work in assumptions about where the economy is heading due to global factors. So, assumptions are

• Due to runaway inflation almost everywhere throughout the globe, and hiking of interest rates by the monetary authorities, businesses driven by consumption will see a drop in demand. People will buy less and will be consuming lesser discretionary items to balance their budgets this lesser demand for cars, electronic gadgets, travel for leisure, movies etc

• Some companies may have to reduce prices to attract consumers for discretionary items but then their profits will be impacted.

• Demand being lesser, Organizations will cut down on capital expenditure on expansion for their facilities, thus lesser jobs creation, hence lesser taxes to be paid, more unemployment hence government spending more on subsidies rather than building productive assets, hence lower GDP growth.

• Therefore the big companies who traditionally spend a lot on fine-tuning their IT infrastructure may have to cut down on their discretionary spending like IT, Marketing expenses.

• With the cut in IT budgets, IT service companies may lose growth, hence lower and lower profits the stock price will be dragged down.

As I pointed out earlier, these are assumptions and the real world doesn't work like that. Recession or no recession, IT companies have the resilience to perform better than expected.

The Actual Reason -

What you should understand is the politics behind the need for a crisis or recession. Crisis doesn't happen, it is created by the private sector for the need for higher profits, lesser taxes, higher inflation and not higher wages and weeding out or laying off politically targeted victims or exchanging between companies.

Let's understand debt and recession then you can conclude that minimum govt companies or jobs and maximum private companies or jobs are failures. The economic policy which has been followed since independence is a failure because you get into debt and then into recession and then the political leaders come into the picture and then some compromises and then the loop.

A recession is a threat from the private sector to get something out of the government and the masses have nothing personal about it.

It's a kind of blackmail now that has impacted the government and the masses have nothing personal about it. It's a kind of blackmail now what is impacted

• Job losses and layoffs -done finding out good ones
• Services in the private sector
• Maybe oil prices
• Others etc.

So effectively we have to find out what the private sector wants to avoid recession : higher profits, lesser taxes, higher prices(inflation) and define our higher wages. At present, you can consider the probable reasons for recession as well -

• Impact of Covid-19 pandemic
• US-China conflicts
• Russia-Ukraine War

Global financial crisis -

Understand the following and then you can conclude what kind of situation the economy is in.

• Cash flow or clearing debt
• Recession
• Valuation of currency
• Debt
• Budget or fiscal deficit
• Inflation
• How to overcome recession
• Impact of the Global Recession 2022 on Startups and Businesses

How to Combat the Impact of the Global Recession 2022?

Don’t live beyond your means. Limit debt to the minimum, ideally housing only. Pay cash for your car, and avoid toys with engines in them (boats, motorcycles, planes, second cars) till their purchase price is an insignificant percentage of your net worth.

Avoid bad habits Budget for life, take vacations, have fun, just don’t live on the edge like so many do, such that if you lost your job you’d lose your home.

If you can, save hard so that you can prosper in the next recession. People with cash can propose when prices are low. In the 1980s, my hometown was selling like crazy for $100,000 for a two-bedroom, two-bath, 1-car garage unit. In the late 80’s you could buy all you wanted for $10,000 to $15,000. But no banks were making ANY loans, so cash was king. The prime units got snatched up by liquid investors and they’ve made a fortune since then. (note that nearly all the condo associations went bankrupt so immanence was a royal pain for a few years but today they are cash flowing like slot machines).

The idea that a recession may or may not come is crazy. We will have a recession, but the question is when and how bad will it be. We’re all hoping that it’s several years away and that it will not be another 2008/2009.

KEY TAKEAWAY -

Figure out how to cut your expenses in good times and plan for the long-term and short-term future.