The Business Cycles
the fluctuations in business
activity over time.
A. Recession: commonly accepted definition is two
of negative growth in Real GDP.
The Futility of GDP? argues that his
is not a good definition.-The Becker-Posner Blog 12/17/09
B. Why business economic activity fluctuated following a cycle
Excessive optimism causes inventories to over
expand and eventually they must be worked down causing a recession.
Computers have made easier
to track inventory and made this type of
recessions less likely.
Shock not foreseen by economic models oil embargo
recessions of the
1970's of 70's.
Downturn is limited to areas or sectors of the economy.
1. Economic activity eventually increases but by then other areas
are in recession.
2. International competition has increased the occurrence of this
recession as sectors such as steel, autos, and recently computers have
recession private sector debt causes a focus on paying down
debt which lowers
aggregate demand and substantially lowering economic growth
Causes of the Great Recession
b. An Historical
Perspective on the Crisis of 2007-0
5. Innovation Cycle:
railroads, computers, bio-technology cause growth/crash
6. Political Events: wars, international trade
7. Misuse of Monetary and Fiscal
Policy: government creates, borrows and or
spends an incorrect amount of money
to balance the budget, lower unemployment,
or lower inflation.
Seasonal variation: Christmas buying rush, spring construction
Long-Term Secular Trends: the expansion or contraction in the level
economic activity over a long period of years (the dark ages,
the industrial revolution) For more
Long Waves Theories of Development
from Professor Kunter Krumme,
Call this a Recession, At
Least It is Not the Dark Ages
By Bryan Ward-Perkins 12/22/09 FT.com
Generations and The Fourth Turning
is one of many cycle theories.
C. Current Conditions
American Institute for Economic
The Great Recession yields a slow
Chance of a Double Dip Video
Business News Network 6/16/10
Big 4 Economic Indicators Since the Bottom
The Story of the American Recovery in 15 charts
5/8/14 The Washington Post
The Great Recession
A Brief History of U S Banking
will provide examples of what has
caused the business cycle in the
The Panic of 1825 and the Most Fantastic Financial Swindle-of-All-Time
4. S&P earnings cycles
Bubbles, Crashes, And Market Corrections, Part 1: 1871 - 1900,
Hemline Index and Economic Predictions
List of U.S. Recessions
Economy Stalled as First Quarter GDP Only 0.2%
Submitted by Robert
First quarter 2015 real GDP is a measly, pathetic 0.2%.
That's quite disappointing, and just shavings and crumbs
away from contraction. Consumer spending was less than
half of the contribution Q4 brought and exports imploded.
While some think this is a report to ignore, that
economic growth will spring back, we think this is quite a
foreboding of bad news.
As a reminder, GDP is made up of:
where Y=GDP, C=Consumption, I=Investment, G=Government Spending,
(X-M)=Net Exports, X=Exports, M=Imports*. GDP in
this overview, unless explicitly stated otherwise, refers to real GDP.
Real GDP is in chained 2009 dollars.
Tthe below table shows the GDP component comparison in percentage point
spread from Q4 to Q1. Lest we forget, trade data is always delayed
and we believe imports will be revised much higher, potentially causing a
Q1 GDP contraction.