Thesis: The four fundamental Bs of recession

Sample Thesis Paper

To have a better understanding the definition and basic concept of recession a very good explanation is given by Farago (2002) which is known as the four Bs.

1. Bubble

2. Buzz

3. Bust

4. Bandage

The origins of a recession can be tracked to the formation of a bubble. The bubble therefore represents the foundation of the recession. Farago (2002) says that bubble means tentative excess in the economy causes certain sectors of the economy to grow at a very unhealthy rate means growing at a rate which is not normal. This expansion could be because of overproducing, overtrading, overspending etc and that is why it is called excess. History of recession tells us that the major factor that causes the bubble was the unhealthy demand of buying commodities for resale rather than for personal use. A classic example can be given of the real estate bubble that occurred in the early 1990s’ when the prices of land became quiet cheap and most of the people started buying real estate to generate profit through reselling. The problem came when there were too many people that invested in the same commodity with the same purpose of making profit which left the market without buyers. A similar kind of scenario developed with the IT industry it happened so unexpectedly that everyone started investing the IT sector which created a bubble and eventually that bubble busted.

The second one is the Buzz in the market, as the name suggests buzz is what the people are talking about in the market also the speculations that are being created about a particular sector or stock which they believe is booming becoming hot. Farago (2002) believes that the impact of this buzz can be very decisive and it can lead to various changes in the economy. For example if a buzz is created in an unstable economy what would be the general reaction of the people that the public would start to pull out their money from the market.

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