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For millennia,

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the people of Britain had been using 
bronze to make tools and jewelry,

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and as a currency for trade.

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But around 800 BCE, that began to change:

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the value of bronze declined, causing 
social upheaval and an economic crisis—

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what we would call a recession today.

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What causes recessions?

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

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and for good reason.

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A recession can be a mild decline in 
economic activity

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in a single country that lasts months,

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a long-lasting downturn with global 
ramifications that last years,

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or anything in between.

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Complicating matters further,

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there are countless variables that 
contribute to an economy’s health,

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making it difficult to pinpoint 
specific causes.

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So it helps to start with the big picture:

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recessions occur when there is a negative 
disruption

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to the balance between supply and demand.

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

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how many products and services producers 
can offer,

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

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An economy’s relationship between supply 
and demand

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is reflected in its inflation rates 
and interest rates.

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Inflation happens when goods and services 
get more expensive.

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Put another way, the value 
of money decreases.

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Still, inflation isn’t necessarily 
a bad thing.

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

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But high inflation that isn’t accompanied 
with high demand

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

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Interest rates, meanwhile,

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reflect the cost of taking on debt for 
individuals and companies.

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The rate is typically an annual percentage
of a loan

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

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Low interest rates mean that companies 
can afford to borrow more money,

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which they can use to invest 
in more projects.

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High interest rates, meanwhile, increase 
costs for producers and consumers,

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slowing economic activity.

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Fluctuations in inflation and interest 
rates

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can give us insight into the health 
of the economy,

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but what causes these fluctuations 
in the first place?

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The most obvious causes are shocks 
like natural disaster, war,

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and geopolitical factors.

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An earthquake, for example,

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can destroy the infrastructure needed to 
produce important commodities such as oil.

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That forces the supply side of the economy
to charge more for products that use oil,

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discouraging demand and potentially 
prompting a recession.

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But some recessions occur in times of 
economic prosperity—

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possibly even because 
of economic prosperity.

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Some economists believe that business 
activity from a market’s expansion

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can occasionally reach 
an unsustainable level.

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For example, corporations and consumers 
may borrow more money

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with the assumption that economic growth 
will help them handle the added burden.

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But if the economy doesn’t grow as 
quickly as expected,

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they may end up with more debt 
than they can manage.

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To pay it off, they’ll have to redirect 
funds from other activities,

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reducing business activity.

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Psychology can also contribute 
to a recession.

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Fear of a recession can become a 
self-fulfilling prophecy

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if it causes people to pull back investing
and spending.

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In response, producers might 
cut operating costs

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to help weather the expected 
decline in demand.

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That can lead to a vicious cycle as cost 
cuts eventually lower wages,

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leading to even lower demand.

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Even policy designed to help prevent 
recessions can contribute.

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When times are tough, governments and 
central banks may print money,

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increase spending, and lower central bank
interest rates.

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Smaller lenders can in turn lower their 
interest rates,

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effectively making debt “cheaper” 
to boost spending.

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But these policies are not sustainable 
and eventually need to be reversed

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to prevent excessive inflation.

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That can cause a recession if people have 
become too reliant on cheap debt

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and government stimulus.

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The Bronze recession in Britain eventually
ended when the adoption of iron

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helped revolutionize farming 
and food production.

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Modern markets are more complex,

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making today’s recessions far 
more difficult to navigate.

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But each recession provides new data to 
help anticipate and respond

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to future recessions more effectively.