Next Recession To Be Different Than Prior Downturns

Matty-Sways

The rise of tech and faulty accounting practices are key factors that may change the shape of future recessions.

Economists believe that a recession is bound to come sooner or later. Continued economic expansion can only last so long and bubbles that have been widening in a variety of sectors will eventually burst. However, what economists are not so sure about is what exactly the next recession will look like and which major economic players will suffer.

For example, major tech companies have become economic behemoths with financial prowess that seems invincible. However, not all tech firms are created equal and even the largest ones have showed vulnerability. For example, during different economic downturns throughout the early 2000s both Microsoft and Amazon experienced sharp decreases in sales.

Additionally, economists believe that tech companies which offer what are seen as nonessential and luxury services will suffer the most during the next recession. The extent to which big tech suffers during a recession will be a defining dynamic.

Additionally, there has been an increase in mergers and acquisitions and an increase in lending from banks to help cover the costs of mergers and acquisitions. However, these loans are being approved to companies that may not be able to afford them. The justification for these loans is the expected cost savings that are projected once the merger and acquisition is finalized. However, smaller firms may be at higher risk of defaulting on these loans.

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