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6 Reasons Why Recessions are a Good Thing!





Yes you read the title right, a recession can be a good thing!  With all the doom and gloom talk of recessions, I think it’s time to look at the other side of the coin.  That is, the positive aspects that recessions can bring.  Even though recession means the shrinking of the economy, it can have many benefits to the everyday person and family.

Who benefits the most from a recession?  The Buyer!

  1. Value Stocks are Plentiful – With recession comes fear in the markets.  The human emotion of fear is usually a bad thing for the stock market except if you are a buyer!  With strong stocks trading at historically low prices, it can be a field day for investors who have cash.
  2. Real Estate Buyers Market – If you are fortunate enough to be in the market for a home, then there is no better time to buy real estate than during a recession.  With fewer buyers out there, houses are sitting on the market a little longer.  This creates a little more motivation in the seller which typically results in lower house prices.
  3. Cheaper to Borrow – A slower economy typically means that the central banks will jump in and lower interest rates in an attempt to encourage spending.  Lower rates means lower debt servicing payments such as mortgages and investment loans.  This is another reason why it’s a great time to be a home buyer!
  4. Retail items are cheaper – With retail sales slower due to consumers cutting their discretionary spending, retailers try to boost their sales by slashing prices.  It’s a great time to buy items that you have been saving up for at a reduced price.
  5. Gas is cheaper – With a global recession, there is a lower demand for oil thus lower oil prices.  As oil and gas prices usually go hand in hand, a recession means that gasoline prices are reduced.  As of today, I haven’t seen gas prices this low since 2003!
  6. It’s Vacation Time -  Lower gas prices along with less people spending money on luxuries (like travel), makes it a perfect environment for a lower cost vacation.  Airline tickets, hotel stays and even car rentals are all reduced in price.  Want an example?  Disney is currently offering 3 nights free if you book a 4 night package with them.

Recession proof your life by balancing your household budget and create a savings for yourself.  The cash will come in handy when things get cheap.





33 Comments, Comment or Ping

  1. 1. Brandon

    I agree…

    But this is all providing you still have a job during the recession

    And weren’t the interest rates in the double digits in the 80s recession?

  2. Brandon: The recession in the 80′s was different and was fuelled largely by the oil crisis of the late 70′s which drove up interest rates…

  3. 3. Miranda

    I agree that if you are in a position to take advantage of opportunities, right now is a great time to do it. Of course, you do have to be a position to be able to some of this stuff. But we can all take advantage of lower interest rates on debt to more rapidly pay it down…

  4. 4. newbie

    Prime may be lower now, but big banks have always found ways to maintain their profit levels. HELOCs used to be at prime rate, but some banks, like TD now offer them at Prime + 1.5%. Also, banks like RBC have a ‘take-it-or-leave-it’ attitude.

  5. Way too much positivity for a Monday morning! :)

  6. So very true! Great post. Most millionaires are made because they have positioned themselves for times like today. When there’s blood on the streets…..buy :)

  7. 7. Anthony

    I wouldn’t say recessions “are” a good thing, but rather “can be” a good thing. For most, it is not a good thing, but for the financially savvy who can take advantage it most certainly is.

  8. 8. Chuck

    We’ve viewed this as an excellent time to pay down our variable rate mortgage.

    I still think some of the “deals” out there are just smoke and mirrors. Pricing a disney vacation online for the first week of April is about the same as what I paid last year when I went in April. Its just this time they discounted the hotel room, when last year I got the dine at disney for free with my room.

  9. I can’t believe some of the deals going on for electronics, especially TVs. Mind you boxing week and the SuperBowl always bring out more ad space for TV deals but I can’t help but think what I paid for my 37″ LCD 2 years ago and know that I could buy TWO 50″ TVs today…

  10. 10. Rebecca

    Good points. There are definitely some deals out there right now for those that are able to take advantage of them.

  11. Just look at the rates to go to some of the best places in South East Asia just a few moments ago. In Bali and Bangkok the room occupancy rates are down to single figures, hotels are giving promotion after promotion to try get tourist dollars. Its a great time to travel!!

  12. totally, agree with those points, but they certainly apply to those lucky enough to still retain a well secure, paying job in a deflating market.

  13. 13. Cow

    Agreed — I made less money in the boom because I sought stability rather than profit in my job. I still make a good salary, mind you, and I’m still employed. :D

    I’m taking a trip to San Francisco next month; taking the train down the west coast (in one of those sleeper car things), one night in Portland, three nights in SF, flying back, and doing the whole thing for about $500. There are absolutely amazing deals out there right now.

  14. Being in my early 20s I had a decent amount of money saved up. As a result of this recession I have been able to travel for cheaper and to purchase shares at prices that seem like a steal. The hard part comes with still earning a decent salary during a recession.

  15. 15. Carlos

    The NY Times had an article this weekend about how many people can now afford homes.

    There are opportunities in recessions, you just need the cash on-hand to take advantage of them!

  16. I would love to go to Disney World on vacation, and that was actually my plan until my work started slowing down to about 25% of what we did last year. Now I’m too scared to spend any money because you never know when you may get laid off.

    But that stay 4 nights get 3 nights free is an amazing deal, and I’m sure I’ll kick myself later if my work picks back up soon.

  17. 17. jesse

    I disagree that real estate is a “buyer’s market” during a recession. We have been in a recession for about half a year and will likely continue for another 1-2 years. Real estate is only a true buyer’s market when prices are low, not necessarily when there is lots of choice but with high prices. From what I see in most parts of the country, there won’t be a true buyer’s market in real estate for several years still.

    Note unemployment will linger for several years after a technical recession has lifted. If you are one of the survivors, there are deals to be had for several years after the resession as well.

  18. 18. TStrump

    Great points – prices are certainly getting cheaper …
    Although, I’d like to see them go much lower.

  19. 19. Jon Kepler

    Some say it’s a buyers’ market and some say it isn’t quite one yet. However, if you’re looking to buy, you most likely only need one good deal (unless you’re, say, stocking up on income properties). I think it’s pretty obvious that finding a really good deal now is significantly easier than it used to be, whether prices overall have fallen significantly enough in your area or not. Therefore, asking whether or not this is a buyers’ market may not be as important as figuring out where you can find the one truly amazing deal you can actually take advantage of.

  20. 20. archanfel

    I think the falling house price (if any) is more than offset by the rising mortgage rate (comparing to prime). And it’s far more dangerous now since hyper inflation is lurking in the shadows.

  21. 21. Personal Finance Ology

    Yes, you are so right. I am excited to try to take advantage of all these opportunities. I truly believe recessions give the little guys an opportunity to catch up w/ the big guys if they play their cards right. And that’s what I intend on trying to do. That being said, I have no idea what I will do yet :).

  22. 22. Gates VP

    @Brandon: brings up a really good point about the 80s.

    Unfortunately, really answering Brandon’s question is probably like 2 or 3 blog posts. Here’s the “really quick version”.

    In the 80s, the government tried to “kill” the recession by raising interest rates. High rates = more people buying government bills = more dollars in circulation = higher inflation rates.

    If you look at the 30s, the US government basically just “printed” money they didn’t really have in an attempt to “keep people working”. Personal savings rates actually went negative as people had to take from their savings to pay their everyday expenses. It all ended with the second world war. The US had a ton of post-war surplus production. So they issued war bonds (effectively borrowing from themselves) and became mass generators and exporters of goods. (b/c of the war, it’s hard to say if the money printing really “worked”)

    If you look at Barack’s current plan. It’s in line with the 30′s version of “printing” money, but it’s on a much more massive scale. Currently, he’s on record saying that the plan is to “print” $1,000,000,000,000 USD this year and for years into the future.

    For perspective, he’s going to introduce into the money supply, one Canadian GDP. Note that the US is necessarily producing any more goods, it just has an extra trillion in cash floating around.

    Which brings me to a really important point about this whole “recession” thing that’s going on.

    All of the points made by FT are very valid, especially in the one-year time frame. However, for those looking out several years, there are lots of really awkward things going on that are going to affect the global economy as a whole.

    Just a peek:
    1. The US, the world’s largest economy, is operating unsustainable deficits. A trade deficit, a savings deficit and a budget deficit, all growing. They’re in an inflationary recession and potentially headed for hyper-inflation (1980s). The US cannot afford to raise interest rates. Of course, they also have the world’s most expensive army.
    2. India & China are trying to join the middle-class world. That’s 2 billion people who want a quality of life on par with the Western standard. That’s placing a very high demand on commodities.
    3. “The world” just lost a lot of “paper money”. I’ve read estimates in 30+ trillion dollar range worldwide. This is a really weird setup, b/c the world didn’t suddenly lose 30 trillion in “stuff” (commodities), a bunch of people really just defaulted on paying their IOUs (dollars). This has actually created a temporary deflation as there is not enough “cash” available.
    4. We are pushing on an energy crisis. 4% of the world consumes something like 50% of the world’s energy.

    So with all of these things that are “cheaper”, I think we have to ask ourselves why?

  23. 23. Anna

    Retail items are cheaper<<<

    So true ^^^^^ (Good article by the way)

    The sales over Christmas were pretty good… and still are! I picked up a bargain digital camera and plasma TV. (Even though plasma might be heading the way of the gas guzzling cars… a social stigma to own…)

  24. 24. newb2

    Recessions are not good things… deleveraging, regulation, fiscal responsibility and throw in some marks for a black president… are good things. But it shouldn’t take a recession to get these things.

    If you lose your job, there is nothing *good* about a recession. Especially if you lose your job that was productive for the real economy (i.e. we could do with a few less people in the financial sector).

    Funny, what are the jobs that people have here that they feel so secure in? I’m curious, cause I know mine’s not safe…

  25. 25. fathersez

    Yes, the recession offers great opportunity for those who prepared for this eventuality. The vast majority of us never ever prepare. This is the precise reason why the prepared few find the vast opportunities.

    Regards

  26. 26. richerandslimmer.com

    You certainly have an interesting way of looking at recessions. I agree that most things are cheap now. But personally, I don’t feel comfortable spending money on consumer goods and vacations now because if I lose my job tomorrow, I will have a nice big TV, and lots of pictures from my Disney vacation, but not enough savings to keep me afloat until the recesssion is over.
    I wrote a blog post about deciding not to go on vacation recently that you can find here:

    http://www.richerandslimmer.com/2009/01/24/vacation-update/

    However, I do agree with you that if one has already saved up a sizeable chunk of money, and has safe job, this is a good time to buy and go on vacations.

  27. 27. Danielle

    I read a blog similar to this the other day and the author got ripped a new one by many people listing sob stories of people they know well who have lost jobs, had expensive health costs and various other unfortunate stories.

    I think that this recession has the power to open up our eyes to the fine line there is between making it and not making it in this country. The benefits of this are twofold. One it puts fiscal responsibility back on the top of the list. Two it raises the social consciousness that people out there need help, because more of these people are your neighbor, your co-worker, you sister… it personalizes the plight of poverty in America.

    I can’t articulate many reasons for it, but I also feel that a recession is a great time to bring the focus to your family. Finding things to do together as a family that are not expensive, that bring back some quality time to your life that might have been slipping away in the “boom”. I also think this particular recession is a great time for my husband and I to start a family. I lost my job recently and am finding it might be quite a while before I find a new one. As long as we can survive on one income this it is a good time to take some time off from my career without the stigma of having done it solely for having a child.

  28. 28. nice

    Gtes VP:
    do you believe the current deflation will soon be replaced with a big inflation?
    and the interest rates will be up(in 3yrs or later)? and the US$ will be deeply down?
    that is what I can see.
    thanks.

  29. 29. Roger

    While I will agree that there are some good points to a recession, if you happen to be unemployed (like me), you tend to focus more on the negative. It’s small consolation that I can travel more inexpensively when I’m worried about how to best pull money from my savings and investments in order to meet my expenses. To say nothing of trying to find a new job when the number of available positions is contracting.

    But, enough complaining; back to job searching and attempting to add to my income through blogging.

  30. 30. Bankruptcy Saskatoon

    A very positive outlook on recession. Definitely a great time for someone who has not severely suffered the repercussions of the economic downturn to take advantage of the various opportunities!

  31. 31. Stephen

    I have to say it is really positive for an online business and there are certainly some recession proof verticals out there, I have seen an increase in traffic as people look to save money online.

  32. 32. ???

    I thought recessions were good time to buy a condo (Me renter for over 6 years and finally saved up a down payment) I found no recession over here in this part of town, North York (Toronto). The condos are going up $10k each month since Victoria Day. I lost 3 bids and I was putting the offers over asking price. Someone always out bids me by a few hundred or thousand… It’s crazy over here. DOM is less than 1 week. I saw the condo on Friday and it was sold on Saturday with no conditions. There was no availability over a few weeks, and boom, one comes out and over 6 offers were in……. Soon the prices will be out of my budget… Don’t know what to do.. ppl said to wait, but the longer I wait, the prices just get higher and higher..

  33. Nice points. :) You’ve shown us a positive side of recessions. Just want to add that it’s nice to take advantage of the offers, provided you still have a source of income and can keep things balanced.

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