0:00:06.824,0:00:08.004
For millennia,

0:00:08.004,0:00:12.414
the people of Britain had been using [br]bronze to make tools and jewelry,

0:00:12.414,0:00:15.060
and as a currency for trade.

0:00:15.060,0:00:19.100
But around 800 BCE, that began to change:

0:00:19.100,0:00:25.120
the value of bronze declined, causing [br]social upheaval and an economic crisis—

0:00:25.120,0:00:28.766
what we would call a recession today.

0:00:28.766,0:00:30.646
What causes recessions?

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This question has long been the subject [br]of heated debate among economists,

0:00:35.066,0:00:36.546
and for good reason.

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A recession can be a mild decline in [br]economic activity

0:00:39.866,0:00:42.596
in a single country that lasts months,

0:00:42.596,0:00:47.406
a long-lasting downturn with global [br]ramifications that last years,

0:00:47.406,0:00:49.846
or anything in between.

0:00:49.846,0:00:51.376
Complicating matters further,

0:00:51.376,0:00:55.026
there are countless variables that [br]contribute to an economy’s health,

0:00:55.026,0:00:59.026
making it difficult to pinpoint [br]specific causes.

0:00:59.026,0:01:01.666
So it helps to start with the big picture:

0:01:01.666,0:01:04.776
recessions occur when there is a negative [br]disruption

0:01:04.776,0:01:07.636
to the balance between supply and demand.

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There’s a mismatch between how many [br]goods people want to buy,

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how many products and services producers [br]can offer,

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and the price of the goods and services [br]sold, which prompts an economic decline.

0:01:19.966,0:01:23.156
An economy’s relationship between supply [br]and demand

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is reflected in its inflation rates [br]and interest rates.

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Inflation happens when goods and services [br]get more expensive.

0:01:31.686,0:01:35.080
Put another way, the value [br]of money decreases.

0:01:35.080,0:01:38.950
Still, inflation isn’t necessarily [br]a bad thing.

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In fact, a low inflation rate is thought [br]to encourage economic activity.

0:01:43.570,0:01:46.770
But high inflation that isn’t accompanied [br]with high demand

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can both cause problems for an economy [br]and eventually lead to a recession.

0:01:52.520,0:01:54.020
Interest rates, meanwhile,

0:01:54.020,0:01:58.390
reflect the cost of taking on debt for [br]individuals and companies.

0:01:58.390,0:02:01.600
The rate is typically an annual percentage[br]of a loan

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that borrowers pay to their creditors [br]until the loan is repaid.

0:02:05.720,0:02:09.790
Low interest rates mean that companies [br]can afford to borrow more money,

0:02:09.790,0:02:12.490
which they can use to invest [br]in more projects.

0:02:12.490,0:02:17.290
High interest rates, meanwhile, increase [br]costs for producers and consumers,

0:02:17.290,0:02:19.565
slowing economic activity.

0:02:19.565,0:02:22.555
Fluctuations in inflation and interest [br]rates

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can give us insight into the health [br]of the economy,

0:02:25.385,0:02:29.385
but what causes these fluctuations [br]in the first place?

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The most obvious causes are shocks [br]like natural disaster, war,

0:02:33.605,0:02:35.717
and geopolitical factors.

0:02:35.717,0:02:37.237
An earthquake, for example,

0:02:37.237,0:02:42.247
can destroy the infrastructure needed to [br]produce important commodities such as oil.

0:02:42.247,0:02:47.557
That forces the supply side of the economy[br]to charge more for products that use oil,

0:02:47.557,0:02:51.935
discouraging demand and potentially [br]prompting a recession.

0:02:51.935,0:02:55.624
But some recessions occur in times of [br]economic prosperity—

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possibly even because [br]of economic prosperity.

0:02:59.044,0:03:03.344
Some economists believe that business [br]activity from a market’s expansion

0:03:03.344,0:03:06.608
can occasionally reach [br]an unsustainable level.

0:03:06.608,0:03:10.548
For example, corporations and consumers [br]may borrow more money

0:03:10.548,0:03:14.828
with the assumption that economic growth [br]will help them handle the added burden.

0:03:14.828,0:03:18.381
But if the economy doesn’t grow as [br]quickly as expected,

0:03:18.381,0:03:21.341
they may end up with more debt [br]than they can manage.

0:03:21.341,0:03:25.051
To pay it off, they’ll have to redirect [br]funds from other activities,

0:03:25.051,0:03:27.471
reducing business activity.

0:03:27.471,0:03:30.391
Psychology can also contribute [br]to a recession.

0:03:30.391,0:03:34.551
Fear of a recession can become a [br]self-fulfilling prophecy

0:03:34.551,0:03:38.550
if it causes people to pull back investing[br]and spending.

0:03:38.550,0:03:41.850
In response, producers might [br]cut operating costs

0:03:41.850,0:03:44.930
to help weather the expected [br]decline in demand.

0:03:44.930,0:03:49.810
That can lead to a vicious cycle as cost [br]cuts eventually lower wages,

0:03:49.810,0:03:52.800
leading to even lower demand.

0:03:52.800,0:03:57.610
Even policy designed to help prevent [br]recessions can contribute.

0:03:57.610,0:04:01.740
When times are tough, governments and [br]central banks may print money,

0:04:01.740,0:04:05.500
increase spending, and lower central bank[br]interest rates.

0:04:05.500,0:04:08.960
Smaller lenders can in turn lower their [br]interest rates,

0:04:08.960,0:04:12.470
effectively making debt “cheaper” [br]to boost spending.

0:04:12.470,0:04:16.620
But these policies are not sustainable [br]and eventually need to be reversed

0:04:16.620,0:04:18.822
to prevent excessive inflation.

0:04:18.822,0:04:23.272
That can cause a recession if people have [br]become too reliant on cheap debt

0:04:23.272,0:04:25.202
and government stimulus.

0:04:25.202,0:04:30.032
The Bronze recession in Britain eventually[br]ended when the adoption of iron

0:04:30.032,0:04:33.256
helped revolutionize farming [br]and food production.

0:04:33.256,0:04:35.416
Modern markets are more complex,

0:04:35.416,0:04:39.166
making today’s recessions far [br]more difficult to navigate.

0:04:39.166,0:04:43.486
But each recession provides new data to [br]help anticipate and respond

0:04:43.486,0:04:46.504
to future recessions more effectively.