Examples of long-term liabilities include mortgages, long-term loans, long-term bonds, pension obligations.

A long-term liability is the opposite of a current liability.

Find out more about liabilities here.

Examples of current liabilities include wages, taxes, account payables.

A current liability is the opposite of a long-term liability.

Find out more about liabilities here.

Read more about current liabilities here.

Examples of intangible assets are bonds, stocks, patents, copyrights, goodwill, trademarks.

An intangible asset is the opposite of a tangible asset.

Find out more about assets here.

Examples of tangible assets are cash, real estate, equipment, machinery.

A tangible asset is the opposite of an intangible asset.

Find out more about assets here.

Liabilities can be divided into two categories: current liabilities (such as wages, taxes, account payables) and long-term or fixed liabilities (such as long-term loans, pension obligations, long-term bonds).

In accounting, liabilities are listed on the balance sheet along with assets and ownership equity.

Note that liability is also used in insurance with the meaning of responsability and financial accountability.

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Assets can either be tangible (such as real estate, equipment, cash) or intangible (such as copyrights, patents, bonds, stocks).

In accounting, assets are listed on the balance sheet along with liabilities and ownership equity.

On the balance sheet, assets are divided into two categories: current assets (such as cash, short-term investments, inventory) and fixed assets (such as real estate, equipment, furniture). Long-term investments (for instance in long-term bonds or stocks) are also assets.

The concept of asset is used in various other areas, such as business, economics and finances.

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A depression can be described as a severe and/or prolonged (at least 3 years) recession. Therefore, a depression and a recession share similar characteristics, only they are much more severe in a depression: at least 10%-drop in Gross Domestic Product, persistent mass unemployment, little investment spending, sustained drop in capacity utilization, contraction of credit, numerous business failures, and deflation (falling prices).

Read more in the glossary entry about recession.

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Recovery is characterized by a fuller utilization of resources (a greater capacity utilization) and a rise in Gross Domestic Product (GDP).

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Recessions are characterized by a fall in production (a decline in Gross Domestic Product for two or more consecutive quarters), employment (at least 1.5% rise in unemployment within 12 months), investment spending, capacity utilization, household incomes and business profits.

Governments usually respond to recessions by decreasing taxation, increasing government spending and/or lowering interest rates. Let’s look further into these three measures:

• decreasing taxation is a way to relieve the financial pressure supported by tax payers and businesses, therefore promoting investment;
• increasing government spending, i.e starting new projects, is a way to spark growth by giving companies business so that they keep running and give people work;
• lowering interest rates is a way to promote businesses’ investment and households’ consumption in order to boost the economy. It makes it easier for companies to borrow in order to invest and produce more. It also makes it easier for people to borrow in order to buy the products produced by those companies.

In the current economic crisis, the US government is also resorting to a more drastic solution given the depth of the problem: printing more money. How is this helping the situation? First of all, part of the printed money goes to the banks in order to prevent the banking system to collapse. Part of the money is also given to major companies that are in financial trouble (it is said that companies are bailed out) in order to keep them running so as to prevent further unemployment. Finally, printing money is also a way of desinflating debts (in the case of loans with fixed interest rates only). As more money is chasing the same amount of goods, prices go up (a phenomenon known as inflation), goods cost more, businesses’ profits rise and wages also go up over time. As profits and wages rise, any debt (again, provided the interest rate is fixed) is relatively worth less that it used to be. The downside of printing more money though is that the currency loses value. Therefore savings are worth less, which is a setback for savers.

If the recession is severe (GDP down by 10%) or prolonged (three or four years), it is called a depression.

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It can be any market, such as stocks, precious metals, real estate, or any asset class. The stock market is considered a bear market if it declines by 20% or more. A bear market usually happens when the economy is in a recession: investors tend to sell because they are anticipating losses. A fast inflation can also lead to a bear market. Indeed when inflation hits prices so strong that they no longer reflect the companies’ actual earnings, investors anticipate a correction of overvaluation and sell while prices are still high. In any case, all this selling causes a drop in prices, which in turn scares more and more investors (concerned about their return on investment), leading to more selling and further drop in prices. The vicious circle is continually auto-fueled.

A bear market is the opposite of a bull market.

bearish is the adjective derived from bear market. For instance, a bearish investor is an investor who believes that the current market is a bear market. By extension, it is sometimes used as a synonym of pessimistic.

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You can find out more on bear markets and how they affect your investments here.