Recession of 1709

From 1709 AN-1711 AN, the Federation of Nouvelle Alexandrie, Kingdom of Ransenar, Western Natopia, Eastern Natopia, and other Micran nations suffered a spike increase in inflation as disruptions in the supply chain mounted in the lead-up to the Natopian division. Further economic uncertainty and lengthy negotiations throughout the mid-1700s surrounding the division of the Natopian Empire, growing consumer demand outpacing supply and manufacturing capacity in all nations, and disruptions in Ransenar and in Lyrica due to the Great Vanic Revolt all contributed to trade and industrial activity contracting. This caused a fall in GDP in several successive quarters in Nouvelle Alexandrie, Ransenar, Western Natopia, Eastern Natopia, and Constancia. Shortages of key consumer goods and food further drove prices of daily staples upward, placing additional pressures on individuals and governments in the affected economies. The economies impacted by this recession are characterized as deeply interconnected economies through financial, military, political, and cultural common associations such as the Raspur Pact, the Community of Goldfield, and the Euran Economic Union.

The recession of 1709 AN-1711 AN was a relatively mild recession but was longer than anticipated. The recession lasted for 13 months, beginning in late 1709 AN and ending in early 1711 AN. The recession ended one of the longest periods of economic expansion in the history of Nouvelle Alexandrie, which had begun in late 1694 AN. In many countries like Nouvelle Alexandrie, Ransenar, and Eastern Natopia, the contraction in economic activity also coincided with the active work of their governments in closing large budget deficits and many of their central banks raising interest rates to stop runaway inflation.

During this relatively mild recession, the Gross Domestic Products of Nouvelle Alexandrie fell 1.2%, Ransenar's fell by 1.7%, Constancia's fell by 0.3%, Western Natopia's fell by 0.9%, and Eastern Natopia's fell by 0.4%. Though the recession ended in early 1711 AN, the unemployment rate in many of the affected nations did not peak until much later. The most affected economic sectors in this recession were tourism, retail, transport, housing, manufacturing, and banking.

As additional large infrastructure projects in Nouvelle Alexandrie came online and more clarity was obtained on the settlement of the Natopian division, economic growth resumed in all the affected economies by the start of 1712 AN, with improved unemployment numbers and decisive action in the economies of the affected nations by their governments to address the recession.

Impact on countries

Nouvelle Alexandrie

• 1708 AN-1711 AN: Great Vanic Revolt: attacks on New Alexandrian politicians, military and economic targets in Lyrica, government targetsb in Cardenas.
• steep decline in tourism in its "normal" hot spots, in particular in the Southern Aldurian Riviera;
  • 1709 AN - bankruptcy of HotelBev Group, loss of 5,000 jobs in the Southern Aldurian Riviera (Region of Alduria) ;
  • 1709 AN - brief strike in the Port of Jirishanca and the Port of Punta Santiago that disrupted most national shipping for two days, resolved by government mediators that arranged for fair agreements in both situations;
  • 1710 AN - bankruptcy of the hospitality groups Aldurian Hotels and Inns and the RoseWood Group; further loss of 8,000 jobs in the Southern Aldurian Riviera (Region of Alduria) ;
  • 1710 AN - banking sector reels from major tourism bankruptcies, and companies that held large debt loads have their properties and assets seized by the government to pay creditors. Prized HotelBev possession Hotel du Babkha is seized by the government of Nouvelle Alexandrie
• 1710 AN - bankruptcy rate in the entire country goes up; the impact of pain in the tourism sector spreads to the banking, retail, and services sectors as consumers start to feel the rising prices of food, mortgages, and other services and consumer goods;
• 1710 AN - unemployment spikes to 12% ;
• 1710 AN - the accession of Anahuaco to the Raspur Pact adds additional Keltian trade partner;
• 1709 AN - 1711 AN - Federal Bank of Nouvelle Alexandrie increases interest rates, cooling the overheated real estate markets in many New Alexandrian cities
  • Rental costs continue to mount, however, as there is not enough supply of housing to meet demand currently or in the future.
• 1710 AN - 1711 AN - key victories by the Federal Forces wrap up the Great Vanic Revolt;
• 1711 AN - constitutional reforms, action on housing, the dust settles around Natopian division, Western Natopia and Eastern Natopia divide with no animosity and in cooperation with each other under the Declaration of Lindstrom and their respective laws and regulations.
  • Economic Rights and Expropriation protections were expanded and constitutionally enshrined, which greatly pleased businesses and entrepreneurs.

Ransenar

• Ransenari farmer-labor crisis, 1709 - Critical shortages of labor in Ransenar's agricultural and mining sectors lead to delays in order fulfillment for agricultural and other raw material exports to Nouvelle Alexandrie, Western Natopia, Eastern Natopia, and Constancia, the average age of Ransenari farmer is about 50 years old, many farms have fallen into large regional farming conglomerates that each entered into government-mandated labor agreements with their workers or farmers;
  • Disruption in Ransenar led to food prices starting to go up in the economies that regularly consume Ransenari food: Nouvelle Alexandrie, Western Natopia, Eastern Natopia, and Constancia;
  • The shipping industry in Ransenar was also woefully understaffed, making it more and more dependent on machinery and automated processes that could get easily bogged down;
• Over previous decades, Ransenar has been focusing efforts on modernization through scientific research and development at the University of Goldfield with subsidies and grants. Economic benefits of scientific research have taken quite a bit to materialize, but the University of Goldfield managed to reach lucrative licensing contracts for their desalinization technology in the Alcalá Declaration. These economic investments suffered greatly in the Recession as promises of development around Lake Nerub didn't fully materialize or had to be placed on pause while the economy recovered;
• 1710 AN - Ransenari government bails out several farming cooperatives, food processing companies, farming companies, regional farming banks, and savings cooperatives in the Rescue Our Farmers Act;
• 1710 AN - Ransenari economic reforms: separation of commercial and investment banking (preventing securities firms and investment banks from taking deposits); created new agencies and offices such as the Commission for Banking and Securities' Regulation and the Ombudsperson of the Consumer, among others;
• 1710 AN - Regional and local bankruptcies spike as order cancellations, shipping delays, layoffs, and other effects from large bankruptcies begin to ripple out into the economy. Unemployment spikes to 8%;
• 1711 AN - Economic reforms, repairs to ports, and repairs/expansions to other critical infrastructure to increase trade and commerce begin to lift consumer confidence, and further mechanical and process reforms (aided by engineering teams from the University of Goldfield, SATCo, and Kerularios & Co) help correct disruptions in supply chain automated processes. Job programs are enacted to recruit unemployed with driver's licenses with jobs in shipping.
• 1711 AN - IDP government introduces taxation reforms that impose a minimum corporate tax on all Ransenari companies and close corporate tax and regulatory loopholes;
• 1711 AN - IDP government embarks on a period of austerity to close budget deficits and reduce debt after the farmer, labor, and banking bailouts.

Western Natopia

• Division of the Natopian Empire
  • process of dividing the Empire was complicated and took a lot of consultations, referenda, and debate in the public and private spheres of Natopian society in both halves;
  • process resulted in the Declaration of Lindstrom and successive "common laws" implemented to ensure that Western Natopia and Eastern Natopia shared common defense, economic, and other policy fields where dividing the Natopian effort would weaken Natopia;
  • settlement around common trade and regulatory policies took several months to years, businesses felt paralyzed by rumors and contradictory information in the marketplace;
  • there was no clear notification to the consumer from the government on how services would change and where to find them via phone, online, or physically;
  • national government came to depend a lot on the demesnial governments, enshrining devolution in the nation's key constitutional documents.
• Uncertainty in the division of the Empire led to the following economic shocks:
  • Decreased consumer and business confidence as regulatory and rules changes were slow to be revealed and complicated;
  • Inflation in food and consumer goods reduce consumer spending, hurts retail and manufacturing;
• With high government spending and other implemented expansionary incentives enacted to prevent a recession, demand accelerated at a faster speed than supply, causing the latter unable to accommodate the demand.
  • Demand was approximately double the country’s GDP potential and the supply side was unable to maintain the economy at an equilibrium. As a result, the demand curve shifted to the right and elevated prices to higher levels.

Constancia

The so-called "Food Shock" that significantly impacted the Constancian economy renewed calls for a food security program within the Imperial State, and while exports from Nouvelle Alexandrie and other nearby trading partners helped stem the tide, realization that the Imperial State was admittedly dependent on Natopian and Ransenar food exports caused a stir in the Imperial Synkletos.

To temper potential political unrest, elections for the 12th Imperial Synkletos were surprisingly called for 1710, after many surmised that the 11th Imperial Synkletos would be the first in history to utilize the maximum constitutional term limit of seven years. An announcement was also surreptitiously made that the Prince Iñigo would relinquish the office of Mesazon on the last day of 1709, ostensibly due to his marriage, to be replaced as Mesazon by Imperial Senator Garvin Hendriksson, due to his strong business background.

The establishment of the Constancian National Credit Union was also initiated, to provide some measure of assistance to the masses. The Constancian Privatization Authority, modeled after the Zeed National Debt Management Authority, was also created to purchase or receive toxic assets and equity from financial and business institutions, and sell the same at auction, to better strengthen the Constancian financial and business sector.

See also

• Community of Goldfield;
• Division of the Natopian Empire;
• Euran Economic Union;
• Raspur Pact.