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What exactly is a recession? -

A recession usually involves a sustained drop in gross domestic product or GDP (the amount a country is able to produce) for two consecutive quarters (six months), indicating that the overall economic output is shrinking. However, it's not just about GDP. Recessions bring a general sense of economic hardship.

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What exactly is a recession? -

To truly understand the silent recession, it's essential to understand what classifies an "economic downturn" as a recession. Typically, economists define a recession as a significant decline in economic activity that lasts for an extended period.

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What exactly is a recession? -

This decline is often measured using indicators like GDP, employment rates, and consumer spending (how much money is being spent by average people every day).

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A trip down memory lane -

Before we dive in, let's take a quick trip down memory lane through America's economic history. Remember the Great Recession of 2008? That was a financial rollercoaster that shook the nation. Or how about the dot-com bubble burst of 2001? Tech dreams came crashing down. And who can forget the early '90s recession? Each of these left its mark on the economic landscape.

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The Great Recession of 2008 -

The Great Recession of 2008 was a major financial earthquake that shook the United States to its core. The collapse of major financial institutions, a housing market crash, and a global credit crisis sent shockwaves throughout the global economy. Millions of Americans lost their homes, jobs, and savings, leading to a very long period of economic uncertainty.

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The dot-com bubble burst of 2001 -

Another notable event was the dot-com bubble burst of 2001. During this period, the stock market experienced a speculative frenzy driven by internet-related companies everyone was investing in, hoping that the share price would skyrocket, making them overnight millionaires. When the bubble burst, countless tech start-ups went under, and stock values plummeted.

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The early '90s recession -

The early '90s recession still lingers in the memory of those who lived through it. Triggered by factors such as a real estate downturn and the savings and loan crisis, this recession resulted in job losses and financial struggles for many.

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What is a silent recession? -

While things may seem fine on the surface, beneath it all, folks are quietly grappling with their own recession. It's not your typical downturn that hits everyone; it's more like a stealthy financial challenge. Think market rollercoasters, dwindling asset values, and income hiccups. All these factors create a growing wealth gap that often goes under the usual economic radar.

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The silent recession unveiled -

Now, let's turn our attention to the present. The silent recession, often disregarded by mainstream media, is a reality for many Americans. Despite rosy reports of economic growth, everyday individuals and small businesses grapple with its harsh consequences. Things are a lot more expensive than they used to be, while earnings haven't gone up anywhere near the same.

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The income enigma -

In 1930, the average American earned just over US$4,800, which, adjusted for inflation, equates to nearly $85,000 today.

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The income enigma -

Surprisingly, in 2023, the average income for a single American stands at a mere US$56,000. This means that, in real terms, Americans today earn less than their counterparts did during the height of the Great Depression.

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Inflating costs -

It's not just income that's taking a hit. Gasoline, the lifeblood of many daily commutes, cost a mere 10 cents per gallon in 1930, roughly equivalent to US$1.73 today.

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Inflating costs -

However, in 2023, the average price per gallon has surged to US$3.55, leaving many commuters gasping at the pump.

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The American dream -

Owning a home has long been a cherished aspiration. In 1930, a house could be yours for an average of US$3,900, roughly $70,000 in today's terms.

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The American dream -

Yet, the average cost of a home in America today, irrespective of size or location, has swelled to US$416,000. This extreme cost has made homeownership only a dream for many.

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The burden of automobiles -

In the depths of the 1930's recession, a new car could be yours for around US$860, equivalent to roughly $15,000 today.

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The burden of automobiles -

Contrast that with the reality of 2023, where the average price for a new car purchased from a dealership stands at a staggering US$48,000. Monthly car payments have skyrocketed, devouring a larger slice of people's earnings.

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Frightening realities -

These stark numbers paint a sobering picture. The silent recession, though often unacknowledged, demands attention and solutions. Rising inflation and mounting expenses are not just numbers on paper; they translate to real struggles for middle and lower-class Americans.

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The shrinking middle class -

The middle class in America is classified as anyone earning between US$38,133 and $114,400 a year in 2023, according to U.S. News & World Report. The shrinking middle class is like a fading puzzle piece in the American economic landscape. Once a symbol of stability and prosperity, it's now caught between stuck incomes, rising living costs, and a widening wealth gap.

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The shrinking middle class -

This decline means fewer people comfortably fit into the middle-income bracket, leading to a growing divide where some move up the ladder while others face financial insecurity.

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Seeking a balanced perspective -

The silent recession label brings attention to genuine concerns, such as the fading ability to achieve the American dream. Affordability also becomes a barrier to starting families or owning homes. However, the United States has seen much worse than this.

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The Great Depression's grim shadow -

The Great Depression was a brutal, extended economic crisis with the stock market collapsing, widespread job loss, home foreclosures, bank collapses, soaring unemployment, and a deflationary spiral.

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The Great Depression's grim shadow -

Today's misery index pales in comparison to the high-inflation era of the 1970s, let alone the Great Depression. The misery index equals the inflation rate and unemployment rate; the higher the index, the greater the misery felt by average citizens. Today the Misery Index sits at 7.465%, according to YCharts.

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The Great Depression's grim shadow -

In contrast, today's unemployment rate stands at 3.8% (as per the Bureau of Labor Statistics), stock markets reach historical highs, and the United States has so far avoided recession.

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The modern-day realities -

The fact is that your dollar doesn't go as far as it used to, not by a long shot. The reality is that everyday people are having to tighten their purse strings just to make ends meet.

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The modern-day realities -

Prospering in this day and age is something that seems difficult to come by for most Americans, with prices continuously rising and income levels seeming to stay the same.

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The modern-day realities -

A substantial portion of workers, particularly Gen Zers, have limited opportunities compared to previous generations, despite headline economic growth.

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What the silent recession means for Americans -

In recent years, the broader US economy has appeared stable. Yet, beneath this facade, a different narrative unfolds for the millions of everyday people trying to succeed.

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What the silent recession means for Americans -

While some Americans enjoy the benefits of economic growth, a silent recession has gripped individuals across the nation.

Sources: (U.S. News & World Report) (Troubadour) (Stansberry Research) (YCharts) (U.S. Bureau of Labor Statistics)

See also: Simple ways to make your cash last

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