Finance: What is economic cyclicality ("boom or bust")?

What is economic cyclicality (“boom or bust”)? Economic cyclicality and “boom or bust” cycles refer to the periods of success or decline that the economy faces. In a “boom and bust” situation or cycle, the economy will flourish for a while and then...tank.

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Transcript

00:20

fact economic cyclicality is a reflection of resource glut and

00:25

then scarcity and the willingness of buyers Teo you know

00:29

buy stuff that is when times were good consumers and

00:31

businesses by things hire workers consume commodities at office space

00:36

and factories until there is a shift in tastes and

00:40

sentiment You know like the horse industry before henry ford

00:43

came along anyway Sometimes the shift that triggers an economic

00:47

cycle comes from the government like when times air too

00:50

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

00:54

choose to just pay up the extra two bucks a

00:56

foot to a rent office space The company can pass

00:59

on that extra cost by raising its prices to customers

01:02

from eighty dollars a year to ninety dollars and nobody

01:05

will notice until they do Yeah the government wanted desperately

01:08

to cool inflation in the nineteen seventies so the fed

01:12

raised short term borrowing rate costs dramatically from somewhere in

01:16

the three to four percent range to closer to like

01:18

ten percent And the cost of renting money became so

01:21

expensive And because companies were highly leveraged borrowing money to

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build factories and hire workers and expand that well then

01:30

everything contracted with leverage right So they had all this

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debt and revenues went down They still to pay the

01:35

dead and well that was a bad scene So inflation

01:38

was contained at the cost of a vastly cooler economy

01:42

So things contract then like a scared turtle or a

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you know like when it do jumps in a cold

01:49

ocean and all right But then eventually one brave alligator

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

01:56

top of the food chain and eat some chickens or

01:59

dear Whatever alligators eat what do they eat anyway And

02:03

the consumer starts buying things adding risk rever been reducing

02:07

it and the cycle takes off again gets picture You

02:10

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

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