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Finance: What is a Business Cycle? 3 Views


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Description:

What is a Business Cycle? A business cycle refers to the ups and downs in GDP or output over a period of time. Business cycles show times when the market is booming and GDP is high as well as times of recession (cycles).

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Transcript

00:00

Finance allah shmoop What is a business cycle Well here's

00:06

a guy giving his cycle the business Yeah the bike

00:10

moves forward in time but this little white mark on

00:12

the tire while it keeps returning to the same place

00:15

again and again and again So yeah that's the foundation

00:18

of the notion of business as a cycle time continues

00:22

but you know business gets hot then cold then hot

00:25

then cold and yeah you get the idea Well why

00:27

is this the case Well lots factors They mostly revolve

00:30

around the wild pagan dance of greed and fear And

00:35

they get exacerbated when governments actively monkey around with the

00:38

cost of renting money otherwise known as the raising and

00:42

lowering of interest rates And if you're new to this

00:45

whole space if you lower interest rates and make money

00:48

cheap to borrow you heat up the economy or at

00:50

least you encourage it to get hot And if you

00:52

raise the cost of borrowing money well then you're going

00:55

to try to cool it off And the reason he

00:57

might want to do that is if inflation is roaring

00:59

right All right well in the us the business cycle

01:02

Runs roughly every eight years for what is called the

01:05

short cycle of business cycles for reasons only partly known

01:08

to humankind the money cycle revolves around the presidential election

01:13

cycle when historically every couple of terms the population gets

01:17

sick of one process of messing up government and they

01:20

choose to elect a new way to mess up government

01:23

So that's The short cycle happens every seven or eight

01:25

years and you see it in the stock market with

01:27

generally meaningful corrections Along that pattern there's also ate a

01:31

long business cycle that sees major shift about every quarter

01:35

century World wars affected numbers Technology innovation affects the numbers

01:40

and other exogenous factors like pollution and labor replacement by

01:44

robots Yeah yeah it's coming and healthcare or disease changes

01:48

and or big innovations that completely repaint the pavement such

01:52

that the tire slipped and turn and twist trying to

01:55

keep the bicycle upright The key goal Look outfor bollards

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