Economic cycle

(redirected from Boom-Bust Cycle)

Economic Cycle

The period of time during which an economy evolves from a state of health to fragility to recession to recovery and back to health. Every capitalist economy has cycles to a greater or lesser extent. However, regulations may be designed to curtail them (or, more accurately, to attempt to maximize the good times while preventing the bad times); this is rarely successful. Factors affecting economic cycles include the level of inflation, the availability of capital, natural disasters, and political events. Some industries are considered countercyclical, meaning that demand for their products remains relatively constant regardless of economic circumstances; some even do better in recessions. Other industries, mainly those considered luxuries, are greatly dependent on economic cycles. An economic cycle is often colloquially called a boom-and-bust cycle.

Economic cycle.

An economic cycle is a period during which a country's economy moves from strength to weakness and back to strength.

This pattern repeats itself regularly, though not on a fixed schedule. The length of the cycle isn't predictable either and may be measured in months or in years.

The cycle is driven by many forces -- including inflation, the money supply, domestic and international politics, and natural events.

In developed countries, the central bank uses its power to influence interest rates and the money supply to prevent dramatic peaks and deep troughs, smoothing the cycle's highs and lows.

This up and down pattern influences all aspects of economic life, including the financial markets. Certain investments or categories of investment that thrive in one phase of the cycle may lose value in another. As a result, in evaluating an investment, you may want to look at how it has fared through a full economic cycle.

References in periodicals archive ?
Steven Marshall would have an on again off again project that would take workers on and then lay them off, open shipyards and close them down in a boom-bust cycle of uncertainty; that s no way to underpin a naval shipbuilding industry.
The entire advent of the freehold phenomena [during the early part of the last decade] and the subsequent boom-bust cycle came against the backdrop of a declining dollar, and rising oil prices, and only in the last year did these two relationships changed.
From 2004 through 2014, we have experienced a complete boom-bust cycle and it is gratifying to note that our resilient business model has delivered profitable growth not only during periods of rapid economic growth but also during periods of economic turbulence.
Glenn Stevens, governor of the Reserve Bank of Australia, said that a boom-bust cycle in house prices would not augur well for the economy.
Many consumers tend to become more dependent on debt to continue spending, thereby worsening the boom-bust cycle.
However, the International Monetary Fund has repeatedly warned Dubai of another possible boom-bust cycle and called for tighter measures to counter property speculation.
The UAE emirate of Dubai is still recovering from its 2009 debt crisis and the International Monetary Fund (IMF) has warned a slew of new real estate projects could lead to another boom-bust cycle.
In recent years, the boom-bust cycle seems to have been alleviated a bit, but that may be more due to M&A activity rather than having a clear understanding of supply and demand.
Finally, it is important to point out that if the newly created fiduciary media do not enter the economy through the loan market to finance business investment and distort the structure of production, there is no Austrian-type boom-bust cycle.
The classic boom-bust cycle actually reduces growth and wastes resources.
In less than a decade, we have experienced a complete boom-bust cycle and it is gratifying to note that our resilient business model has delivered profitable growth not only during periods of rapid economic growth but also during periods of relative economic stagnation or contraction.
That sure beats the boom-bust cycle of the last twenty years.