The document discusses the effects of recession on investment. It notes that during a recession, the income of retail investors is reduced, gold prices are directly affected, and more gold is invested in if prices drop further. It also discusses how a recession is defined as two consecutive quarters of declining GDP. Finally, it outlines some of the fiscal and monetary policies that governments can implement to help stimulate the economy and recover from a recession, such as tax cuts, increased government spending, lowering interest rates, and reducing bank reserve requirements.

2. EFFECTS OF RECESSION ON
INVESTMENT
 It reduce the level of income of retail investor.
 It directly affect the gold price
 It increase the more gold investment if price of
gold reduce more.
 Gold and crude oil prices are directly connected.
 Gold and silver prices are moving in a same
direction.
 It attract more institutional investor to hold
physical gold .

3. Before, understanding “Recession”,
we need to understand the market
economy;
A] TWO STAGES OF MARKET ECONOMY
B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY

4. A] TWO STAGES OF MARKET ECONOMY
A1] Growing Market Economy
A2] Declining Market Economy

5. A1] Growing Market Economy
Starting Point = Willingness to buy

6. A2] Declining Market Economy
Starting Point = Unwillingness to buy

7. B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY
Producer wants his demand always to be high
Consumer wants his buying cost always to be low
Actually, Demand is the price at which
consumer is ready to buy and
producer is ready to sell;
Usually, we think;
Demand = Quantity
But, here Demand = Price;
This is because,
Price decides the Quantity of Sales;
Producer Price
Competitive Price = More Demand;
Consumer Price
In competitive Price = Less Demand;

8. C] What is Recession?
Recession is the economy shrinking for two
consecutive quarters (=6 months) with a
decrease in the GDP (=Gross Domestic Product)
GDP = Value of all the reported goods and services
produced by the people operating in the country
GDP = MONEY VALUE OF {C + I + G + (X – M)}
C = Consumables, I = Gross Investments, G = Government Spending,
X = Exports, M = Imports

9. C] What is Recession?
GDP is a good indicator of economy; Other
indicators could be;
-Unemployment Rate
-Consumption Rate
-Actual Personal Income
-Etc..
If GDP is growing, then market is growing due to
increased demand;

10. C] What is Recession?
GDP is a good indicator of economy; Other
indicators could be;
-Unemployment Rate
-Consumption Rate
-Actual Personal Income
-Etc..
If GDP is growing, then market is growing due to
increased demand;
Note: If the recession continues for next quarter, (>6
months) then we go through “DEPRESSION”
Economy;

11. C] What is Recession?
There is a joke that economists quote to explain the
Difference between “Recession & Depression”
RECESSION
= WHEN YOUR NEIGHBOR LOSES HIS JOB
DEPRESSION
= WHEN YOU LOSE YOUR JOB

12. D] What is a Business Cycle?
What goes up; Has to come Growing economy has to
down; come down if the production
rate of goods & services was
more than the actual
consumption;

13. E] Why Recession happens?
E2] LOW
E1] OVER
CONFIDENCE
PRODUCTION
LEVEL

14. E] Why Recession happens?
E1] OVER
PRODUCTION
PSEUDO DEMAND A situation in which the
ACTUAL NEED WAS supply exceeds the nation’s
NOT THERE; ability to consume what has
WRONG PROJECTIONS
been produced;
COMPANIES
PRODUCED Supply > Demand
MORE

15. E] Why Recession happens?
E2] LOW E2.1] Word of mouth
CONFIDENCE
LEVEL
E2.2] Assignable Cause
E2.1] Word of mouth
ow Confidence Level Consumers are fearing that they may
f Millions of lose their jobs; So, they have less
onsumers and confidence to spend money and buy
roducers after they goods; This will result in reduction
ear many job cuts, in demand in the market; Consumers
Demand coming down, start saving money instead of spending
ompanies’ bankruptcy, money; This is a downward spiral in
tc the economy;

16. E] Why Recession happens?
E2] LOW E2.1] Word of mouth
CONFIDENCE
LEVEL
E2.2] Assignable Cause
E2.1] Word of mouth
Consumers are not stock materials, they
ow Confidence Level Producers do fearing that they may
f Millions of lose their jobs; So, they have less the
reduce their productions, gets into
onsumers and confidence to spend money and buy
cost reduction activities, worried about
roducers after they goods; This will result in reduction
the profitability, etc…
ear many job cuts, in demand in the market; Consumers
Demand coming down, start saving money instead of spending
ompanies’ bankruptcy, money; This is a downward spiral in
tc the economy;

17. E] Why Recession happens?
E2.2] Assignable Cause
Bad Incidences Happening;
Example: September 11 Terrorist Attack in US;
International Airport block in Thailand;
Mumbai Attacked in India;
etc…
Series of such incidences
leading into a kind of War
Please see next slides, for details on business impact;

18. Terrorists’ Attack on 11th September in US
Created fear in people
People cancelled their travel plans
Resulted in low occupancy rates
Airlines & Hotel Industries badly hit
Airline & Hotel Industries offered discounts,
gift coupons, to attract people
But, still, no improvement in occupancy
rate
Airline & Hotel Industries started
CONTINUED
“Cost Reduction” activities
IN NEXT SLIDE

19. Terrorists’ Attack on 11th September in US
Airline & Hotel Industries started
“Cost Reduction” activities
iii] Salary reduction to
i] Reduce No. of flights ii] Lay off people
“Not laid off people”
Low or No income to They became careful due
In flight meals reduced
spend and buy goods to the fear of loss of job
Meals supplying company Demand for other goods Started saving money
got the hit come down instead of spending
Catering company now, Demand for other goods
lays off people come down

20. So, you can see how the hit on Airline and Hotel
industries can affect “Un-related” industries
in the end;
One industry can hit many other industries when the
confidence level of millions of consumers & producers
drastically comes down;

21. F] How to know recession?
Indicators to say a nation is in recession;
- People buying less stuff
- Decrease in factory production
- Growing unemployment
- Slump in personal income
- An unhealthy stock market

22. G] How to come out of recession?
It is unhealthy for any nation to be in Recession;
So, Government will take certain countermeasures
to eliminate or reduce the Effect of recession for turnaround;
Important Point:
Today, it is a market Economy
Producers; Consumers;
Can produce and Can decide to
sell at their prices buy or not;
Both Producers and Consumers are free to act; Not a forced action

23. G] How to come out of recession?
Hence, Government does not have direct control on Producers’ & the
Consumers’ behavior; But, they can influence millions of Producers &
Consumers with Government’s policies;
Government has 2 plans
Fiscal Policies Monetary Policies
(By Govt.) (By RBI)
Government influences the RBI manipulates
economy by changing how the available supply of
it (Government) spends money in the country
and collects money

24. G] How to come out of recession?
Fiscal Government influences the economy by changing
Policies how it (Government) spends and collects money
1] Tax cuts for More money
businesses or available for
for individuals spending
2] More Spending Individuals get Demand picks
by Govt. to salary and spend up; Market
create jobs money can recover;
3] Automatic
Some income to
fiscal policy;
unemployed
Unemployment
people to spend
Insurance

25. G] How to come out of recession?
Monetary Government manipulates the available supply
Policies of money in the country
More money
1] Reduce reserve
available for bank
ratio
to give loans
What is Reserve Ratio?
Demand picks
up; Market
Each bank has to keep a high % of their assets in
RBI (Reserve Bank of India). These assets do not
can recover;
earn any interest to banks. This money kept in
RBI is called “Reserves”; RBI sets certain ratio
of this reserves and it is called “Reserve Ratio”

26. G] How to come out of recession?
Monetary Government manipulates the available supply
Policies of money in the country
More money
1] Reduce reserve
available for bank
ratio
to give loans
2] Lower the Individuals take
Demand picks
interest rates more loan up; Market
can recover;

27. G] How to come out of recession?
Monetary Government manipulates the available supply
Policies of money in the country
More money
1] Reduce reserve
available for bank
ratio
to give loans
2] Lower the Individuals take
Demand picks
interest rates more loan up; Market
can recover;
3] Use its own It becomes an
reserved income to Govt.
money to buy to inject money
Govt. bonds into the market

28. I] WOW!!!!!!!!
RBI’s Power or Government’s Power is double-edged
sword; Sometimes, their policies to recover from recession
can be counter-productive and it may further worsen the
situation;
If we advise our people to save money, then, the multiplication effect is that
the demand will not pickup and recession will continue; Very peculiar!!!!! But, I
am not misguiding you; Just think from a macro level, if everybody in the
country stops spending, what will happen?
Nation’s recession is controlled by the actions of
everybody living
in that country;

29. I] WOW!!!!!!!!
Most of the developing Currently, GDP Growth
Economies like China, Slow Down Rate Down; But,
India; Stage; Not yet Still expected to be
in Recession Around 6% in India
Most of the developed
Economies like US, Currently, GDP Growth
Japan, Germany, etc in Recession Rate Negative;

30. HOPING THIS TIME
RECESSION VANISHES
SOON SO THAT
INDIA GETS BACK
TO ITS STRONGER
GDP GROWTH RATE
OF 8% TO 10%