6: For millennia,

8: the people of Britain had been using bronze to make tools and jewelry,

12: and as a currency for trade.

15: But around 800 BCE, that began to change:

19: the value of bronze declined, causing social upheaval and an economic crisis—

25: what we would call a recession today.

28: What causes recessions?

30: This question has long been the subject of heated debate among economists,

35: and for good reason.

36: A recession can be a mild decline in economic activity

39: in a single country that lasts months,

42: a long-lasting downturn with global ramifications that last years,

47: or anything in between.

49: Complicating matters further,

51: there are countless variables that contribute to an economy's health,

55: making it difficult to pinpoint specific causes.

59: So it helps to start with the big picture:

61: recessions occur when there is a negative disruption

64: to the balance between supply and demand.

67: There's a mismatch between how many goods people want to buy,

71: how many products and services producers can offer,

74: and the price of the goods and services sold, which prompts an economic decline.

79: An economy's relationship between supply and demand

83: is reflected in its inflation rates and interest rates.

87: Inflation happens when goods and services get more expensive.

91: Put another way, the value of money decreases.

95: Still, inflation isn't necessarily a bad thing.

98: In fact, a low inflation rate is thought to encourage economic activity.

103: But high inflation that isn't accompanied with high demand

106: can both cause problems for an economy and eventually lead to a recession.

112: Interest rates, meanwhile,

114: reflect the cost of taking on debt for individuals and companies.

118: The rate is typically an annual percentage of a loan

121: that borrowers pay to their creditors until the loan is repaid.

125: Low interest rates mean that companies can afford to borrow more money,

129: which they can use to invest in more projects.

132: High interest rates, meanwhile, increase costs for producers and consumers,

137: slowing economic activity.

139: Fluctuations in inflation and interest rates

142: can give us insight into the health of the economy,

145: but what causes these fluctuations in the first place?

149: The most obvious causes are shocks like natural disaster, war,

153: and geopolitical factors.

155: An earthquake, for example,

157: can destroy the infrastructure needed to produce important commodities such as oil.

162: That forces the supply side of the economy to charge more for products that use oil,

167: discouraging demand and potentially prompting a recession.

171: But some recessions occur in times of economic prosperity—

175: possibly even because of economic prosperity.

179: Some economists believe that business activity from a market's expansion

183: can occasionally reach an unsustainable level.

186: For example, corporations and consumers may borrow more money

190: with the assumption that economic growth will help them handle the added burden.

194: But if the economy doesn't grow as quickly as expected,

198: they may end up with more debt than they can manage.

201: To pay it off, they'll have to redirect funds from other activities,

205: reducing business activity.

207: Psychology can also contribute to a recession.

210: Fear of a recession can become a self-fulfilling prophecy

214: if it causes people to pull back investing and spending.

218: In response, producers might cut operating costs

221: to help weather the expected decline in demand.

224: That can lead to a vicious cycle as cost cuts eventually lower wages,

229: leading to even lower demand.

232: Even policy designed to help prevent recessions can contribute.

237: When times are tough, governments and central banks may print money,

241: increase spending, and lower central bank interest rates.

245: Smaller lenders can in turn lower their interest rates,

248: effectively making debt “cheaper” to boost spending.

252: But these policies are not sustainable and eventually need to be reversed

256: to prevent excessive inflation.

258: That can cause a recession if people have become too reliant on cheap debt

263: and government stimulus.

265: The Bronze recession in Britain eventually ended when the adoption of iron

270: helped revolutionize farming and food production.

273: Modern markets are more complex,

275: making today's recessions far more difficult to navigate.

279: But each recession provides new data to help anticipate and respond

283: to future recessions more effectively.