Recession. It’s the boogeyman of the economic cycle. And while many people dread these low points, our economy would be worse off without them. How could something so negative make a positive impact on the economy? It’s simple.
When the economy is expanding, money flows into hot, high-growth sectors. Over the years, as the money piles into one or two booming sectors, other sectors are ignored. Eventually, there is over-investment in the booming sectors, while the others are left under-invested.
What a recession does is help reduce the over-investment and redistribute that money to under-invested sectors. This helps add new jobs, new industries, and new sources of income to the economy.
For example, after the real estate bubble collapsed, the money flew (and is still flying) right into commodities (which saw massive under-investment throughout the 90s). You can be sure that once the commodity sector expands significantly and finally begins contracting, money will fly into other parts of the economy that need the money more.
So you see, recessions are a necessary function of the markets. Without them, money isn’t distributed as effectively. And you can do your part to nudge the economy upward – and make serious money for yourself – by seeking out good deals in under-invested sectors.
[Ed. Note: No matter how bleak the economy looks right now, there is still room for you to make money. In fact, once you master a surprisingly simple system, you can be on your way to more wealth than you can imagine. Get the details here.]
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