Is the Boom-and-Bust Business Cycle Dead?

🌈 Abstract

The article discusses the possibility that the traditional boom-and-bust business cycle in the U.S. economy may have fundamentally changed, becoming a more stable and less volatile cycle.

🙋 Q&A

[01] Is the Boom-and-Bust Business Cycle Dead?

1. What are the key viewpoints on whether the traditional business cycle has changed?

• There is a growing view that the U.S. business cycle has changed for the better, with a more diversified economy
• Some prominent economists and voices on Wall Street believe the unruly business cycle they learned about has fundamentally morphed into a tamer beast
• The analogy of "satellites don't land" is used to suggest that dips in economic momentum will now happen within a steadier orbit, rather than the traditional boom-and-bust cycle

2. What is the traditional pattern of the business cycle described in the article?

• Periods of economic growth get overstretched by increased risk-taking
• This leads to a contraction as consumer confidence wanes and spending craters, with sales falling, bankruptcies and unemployment rising
• Then in the depths of a recession, debts are settled, panic abates, and a recovery enables a new upswing

3. What factors are cited as potentially contributing to a change in the business cycle?

• The U.S. having a more diversified economy
• Improved ability to manage economic dips and maintain steadier growth

[02] Analogies for the Modern Economy

1. What analogy is used to describe the potential change in the business cycle?

• The analogy of "satellites don't land" is used to suggest that dips in economic momentum will now happen within a steadier orbit, rather than the traditional boom-and-bust cycle