Mankiw defined economic depression as a phenomenon in which people’s incomes decline and their consumption goes down, resulting in the decrease in the output of the economy and the increases in the unemployment rate. Most people are in trouble when the economy enters a crisis. Households reduce consumption, and companies lose sales, so the operation rate of their factories drops and they are forced to lay workers off. Employees lose their jobs, and young people cannot get a job, and the vicious cycle continues. The economic recession has continuously repeated in the history of humankind. In recent times, with the US Great Depression in 1929, Asian financial crisis in 1997, the US subprime mortgage crisis in 2009, the European debt crisis in 2011, and the Chinese stock market turbulence in 2015, the economy has repeatedly fluctuated like a roller coaster.
In general, once the economy falls into a recession, the first step the government takes is to lower interest rates. It intends to promote the economy by encouraging borrowers to borrow money from the bank and circulating capital in the market. However, the policy of the government often has unexpected and unintended side effects. For example, people borrow money at a low interest rate and face a difficult situation in repaying it at a higher cost when the economy bounces back. Or low interest rates boost speculative funds and further polarize the gap between rich and poor.
In fact, finding and solving the causes of the economic downturn is quite difficult. The factors that affect the economy are numerous and complex, and indeed no one can predict what will happen tomorrow. The prospects of prominent economists are often wrong, and even excellent fund managers occasionally suffer from massive investment losses.
In Ecclesiastes 8:17, even the wise King Solomon realized that no man can figure out why an accident happens and know the future.
The ruler of the economy is God. He has created all things and managed them with His wisdom. The economy is just one of them. From time to time, God has used the economic recession as one of His ways to rule His people. The Bible explains why and when those recessions occurred in many instances.