Business Cycle

Finance allah shmoop What is economic cyclicality All right Well

if you looked at the history of growth and decline

in the u s economy you think it was run

by a bunch of knuckleheads Meat would poop and poop

all in congress Now surprisingly o r maybe not In

fact economic cyclicality is a reflection of resource glut and

then scarcity and the willingness of buyers Teo you know

buy stuff that is when times were good consumers and

businesses by things hire workers consume commodities at office space

and factories until there is a shift in tastes and

sentiment You know like the horse industry before henry ford

came along anyway Sometimes the shift that triggers an economic

cycle comes from the government like when times air too

good there's usually rampant inflation People in companies will simply

choose to just pay up the extra two bucks a

foot to a rent office space The company can pass

on that extra cost by raising its prices to customers

from eighty dollars a year to ninety dollars and nobody

will notice until they do Yeah the government wanted desperately

to cool inflation in the nineteen seventies so the fed

raised short term borrowing rate costs dramatically from somewhere in

the three to four percent range to closer to like

ten percent And the cost of renting money became so

expensive And because companies were highly leveraged borrowing money to

build factories and hire workers and expand that well then

everything contracted with leverage right So they had all this

debt and revenues went down They still to pay the

dead and well that was a bad scene So inflation

was contained at the cost of a vastly cooler economy

So things contract then like a scared turtle or a

you know like when it do jumps in a cold

ocean and all right But then eventually one brave alligator

emerges to see if it concrete's back up under the

top of the food chain and eat some chickens or

dear Whatever alligators eat what do they eat anyway And

the consumer starts buying things adding risk rever been reducing

it and the cycle takes off again gets picture You

know it's the circle the circle of life round and

round It goes where it stops Well actually we do 00:02:15.523 --> [endTime] know Circle of economy