|I. The Business Cycle Measures Fluctuating Business Activity|
A. Recession: commonly
accepted definition is two consecutive quarters
of negative growth in Real GDP
B. Why business economic activity fluctuated follows a cycle
C. Should we jettison GDP as an economic success points out many shortcomings.
Since 1950 Only the Great Recession Had a Negative Year
is the difference between actual
actual output and potential
Recent Growth Cycles
1. Inventory Recession: Excessive optimism causes inventories to over expand
and eventually be worked down causing a recession. Computers have
made easier to track inventory and made this type of recessions less likely.
2. Endogenous Shock not foreseen by economic models oil embargo
recessions of the 1970's of 70's.
3. Rolling Recession Downturn is limited to areas or sectors of the economy.
a. Economic activity eventually increases but by then other areas and sectors
are in recession.
b. International competition has increased the occurrence of this type of
recession as sectors such as steel, autos, and recently computers have
4. Balance sheet recession: private sector debt causes a focus on paying
down debt which lowers aggregate demand and substantially lowering
a. Causes of the Great Recession
b. An Historical Perspective on the Crisis of 2007-08
c. Often require a central bank to act as a Lender of last resort
5. Innovation Cycle: railroads, computers, bio-technology cause growth/crash
6. Political Events: wars, international trade
7. Misuse of Monetary and Fiscal Policy: government creates, borrows and or
spends an incorrect amount of money to moderate economic activity.
a. Well run economies like Taiwan, Japan and the U.S. are all recently guilty.
b. Some feel Chain's authoritarian government which has successfully
navigated growth for 30 years will again steer clear of catastrophe but
Ruchir Sharma's 2016 book The Rise and Fall of Nations: Ten Rules
of Change in the Post-Crisis World’, thinks they are in Deep Do Do, or
D3 for math people.
a. Seasonal variation: Christmas buying rush, spring construction
b. Long-Term Secular Trends: the expansion or contraction in the
level of economic activity over a long period of years (the dark
ages, the industrial revolution) For more visit
1) Long Waves Theories of Development from Professor Kunter Krumme,
2) Call this a Recession, At Least It is Not the Dark Ages
3) Generations and The Fourth Turning
9. Abbott and Costello Explain the Unemployment Situation
10. Action to Stop Recent Recessions, NYT 1p
3. Real Business Cycle
|E. Recoveries Can Be Slow and Weak||
See Our Studies
The Financial Crisis
Most Severe US Recessions
2015 Political Economy Controversies
Action to Stop Recent Recessions, NYT
Bubbles Credit And Their Consequences FED looks at mortgages
Democratic Capitalism vs. Capitalistic Democracy
Note the ten year recovery was the 1990s. The Vietnam expansion
of the 1960s. The longest was after WW2 and included the Korean War. Does
anyone want to invade Clinton or Trump to increase and extend current recovery
by Syria plus bringing back the draft?
E. Predicting Recessions
3. Economics in the dock looks at irrational economic behavior 6 Min Video
Leading Indicators Links
Economic Forecast Outlook Barely Positive is extensive with many graphs
1. U.S. Fiscal Policy Reality and Outlook/ 5/20/16
and Current Business-Cycle Conditions from AIER
2. Why The Great Recession yields a slow recovery
3. 20th Century U.S. Decade Ranking indicate US doing well.
4. The Big 4 Economic Indicators Since the Bottom
5. The Story of the American Recovery in 15 charts
6. Secular Stagnation
7. Learning from the Great Recession
a. Lessons Ignored from the 1930's 23 min video
b. Harsh Lessons Historical
c. Have Ghosts of 1937 Returned to Haunt Us?
8. Credit and crises and the economic shocks of 2016 podcast 40 minutes
Bubbles based on both housing and asset credit means deep-do-do
9. Econ Talk Podcast Recession, Stagnation, and Monetary Policy EconTalk Podcast 1/9/17
10. The Great Stagnation by en 88 min. Video
11. Mark Blyth: After the Financial Crisis: How to Tell the Forest from the Trees 57 min. video
12. Bigger-raises-might-be-coming-in-2018 1/8/18
13. What Will Finally Lift Wages for Middle Earners 2-2-18
Unit I. Reviewpeak economic activity, recession, recovery, expansion
II. History of the
1 Most Severe US Recessions
2. A Brief History of U S Banking will provide examples of what has
caused the business cycle in the United States.
3. The Financial Swindle-of-All-Time
4. The first financial panic
a. Causes of the 1837 Panic
b. Panic of 1837
c. Effects of Panic of 1837
5. S&P earnings cycles
a. Part 1: 1871 - 1900, Source
b. rt-2-1900- 1925
6. Boettke podcast on the Austrian Hemline Index and Predictions
8. Cycles Lists
a. List of U.S. Recessions
b. Business Cycle data since 1854 from NBER
c. Top 10 Worldwide 20th Century Financial Crises
10. The Panic of 1907: The fourth so-called ”panic” in 34 years.
9. The Mexican Peso Crisis 1994 aka “The December Mistake” Punta!
8. Argentine economic crisis - 1999 If you have no money, is it a good
idea to print more?
7. German hyperinflation - 1918-24 If you have to print a 1,000-billion
Mark note, you probably have too much inflation.
6. Souk Al-Manakh - 1982 Try not to use post dated to buy stocks
5. Black Monday - 1987 Can we call a 23% drop in a single day
a black swan?
4. Russian financial crisis - 1998 devaluation of the ruble and
cancellation of debt is never good for a local stock market.
3. East Asian financial crisis - 1997 aka the Asian Contagion
2. Black Tuesday - 1929 — Really? One day, and not the entire
1. 1973 Oil Crisis — Big energy price increases cause recessions
The Long Depression And Panic Of 1873
Great Depression by Robert J.
E. Recession of 2007 Articles
1. Great Recession reviewed in a paragraph.
2. A Business Cycle Ends, U.S. Workers Lose Ground slide show reviews
the latest business expansion ending in early 2008.
3. On the Economy CNBC Video, 4/1008 An overview of the economy
with Joseph Stiglitz, a Nobel Prize-winning of PIMCO
4. Fed Watch: Turning Which Corner? 05//09
5. Older Americans Made Recession Look Better April 2010, by
M. Kudlyak, D. Reilly and S. Slivinski, FED Richmond.
6. Five ways deflation has already takenhold is a concise forty year review
of recent cycles From renown economist G Shilling from Bloomberg.com
7. Great American Economic Growth Myth
8. The Week Inequality Debt And Credit Stagnation
9. Great Moderation preceded the Great Recession
F. Bubbles Credit And Their Consequences FED looks into predicting bubbles
G. Videos and graphs
1. American-Experience 29 Crash
2. South Sea Bubble of 1720 video
3. Tulip mania: the classic story of a Dutch financial bubble is mostly wrong
4. Great Recession Slow Recovery Videos Episode 1 2
H. Economic Cycles Before the Fed | Thomas E Woods, Jr. Austrian School
Great Recession on top of Two Bush Wars
Recovering from Great Recession
1 establishes recovery actually has been weak, even
compared to other
5. Four Videos
a. Structural and Frictional
d. Generation Jobless
B. Key Unemployment Topics
1. Natural unemployment rate (frictional + structural
unemployment) is usually 4-6% of the labor force
See Unemployment’s Steady Fall Could Signal Trouble—or a Broader Structural Shift 8/27/17
2. Full employment is when cyclical unemployment equals zero
3. Okun's Law: a 1% increase in cyclical unemployment (actual
rate - natural rate) will cause a 2.0% annual drop in GNP.
a. GNP change = (2.0) (unemployment rate change)
b. If unemployment goes up 2% points as it did in the 1990-91
recession then the drop in GNP would be 2.0 X 2% or 4%.
c. Approximate first year (2009) cost of the Great Recession
(3.5% X $14,000,000,000,000) /300,000,000 =
d. Okun's Law and the Great Recession 3/28/12
e. Okun's Law, Labor Markets in the Global Financial Crisis
4. Labor Force Participation Rate from The Big Picture blog.
5. Noneconomic costs of unemployment include loss of skills,
&n this problem in late 2012)
6. Discouraged workers leaving the workforce lowers
unemployment. first 2 charts courtesy of Gluskin Shef
7. Q&A: Unemployment Extension WSJ, 11/18/10
8. Gallup has Higher Unemployment and Underemployment
than the government. 04/01/11
9. How The Government Manipulates Unemployment Statistics
D. R. Amerman 3/12
10. 2 Videos on negative effects of minimum wage on employment
1. Creating Jobs and Economic Security 3/27/18
2. Economics of Minimum Wage
3. New Study Proves Seattle's High MW Punishes Poor
4. Sticky Wages Hold Back Job Growth WSJ, 11/12/10
5. Exploring Different Unemploymnet Risks
Unit III. Review Unemployment causes frication within employment process, structure problems, cycle effects
More Unemployment Data
To answer this question first requires a few definitions. A person is considered unemployed if he or she is actively seeking work and willing to take work here and now. It is therefore not sufficient to simply not be working. But this definition of unemployment does necessarily define (1) whether someone who is underemployed should be counted as well or (2) how intensely someone must search for a job to qualify as unemployed. For this reason, the Bureau of Labor Statistics provides different unemployment rates, graphed above. These are commonly called U-1 through U-6:
These various interpretations of the definition of unemployment allow us to have a better understanding of the status on the labor market. But one may still have some misgivings about them. For example, the higher-numbered definitions give equal weight to different classes of unemployed workers. For example, should a person qualifying for U-1 count as much as a person qualifying only for U-5 and U-6 when evaluating the health of the labor market? To address this question, there is the Hornstein-Kudlyak-Lange index that creates a weighted sum of the different categories. The goal is to evaluate the underutilization of labor in the economy. This index (it is available with and without the part-time workers from U-6) is plotted below along with the popular U-3."
Bad But Getting Better
Editors Note: The calamity of the1930 resulted in federal programs like
Editors Note: The unemployment rate was high in 2011, 2012 and early 2013. But, calling it a Great Recession compared to the 1970's and early 1980's which also had inflation which really hurt those on fixed incomes and those with non real estate assets is an exaggeration. Especially since the earlier period had two periods of high unemployment and ten plus years of slow growth might. wikipedia be a bit of a stretch? See 16) Stagflation and the Rise of Supply-Side Economics
A. Calculating Inflation: What does a basket of goods cost?
1. An increase in prices is measured by a price index
a. Consumer Price Index, CPI
b. Producer Price Index, PPI
2. The PPI measures the change in wholesale priced goods..
3. The PPI is a leading indicator for CPI as wholesalers can usually
pass price changes on to retailers who pass them to consumer.
a. Recent increases in foreign competition made passing
price increases on more difficult.
b. The internet had the same kind of affect in the late 1990's.
4. Calculating inflationary rate for a year when a basket of consumer
goods increase from $400 to $420 would be calculated as follows.
Chained Consumer Price Index allows basked of goods
Unit IV. Review
Inflation caused by Demand Pull or
V. Are Wages Stagnant? Real Median
Compensation Reveals Answer
B. Price Index used dramatical
1. CPI Adjusted Index-Chart is Red
a) Adjusts for seasonable differences
b) Under estimates income change source
c) Used by people wanting quickly updated data
d) Used to grow support for government programs
2. CPI-U-RS Adjusted-Chart is Blue
a) Measures urban purchases which is more realistic
b) It does not incorporate all possible data on past inflation.
c) For example, no attempt made to reflect any new information
on trends in the safety or comfort of air travel for which there
is no corresponding methodological change in the CPI-U. bls.gov
3. PCE A Index-Chart is Green reflects "consumer substitution" is difficult
to implement in real time.
a) Measures buying of economic shoppers
b. When oranges are really expensive substitute bananas or grapefruit.
1. BLS examples
3. CPI A is like always shopping at the local convenience stores
4. PCE is like shopping at Wal-Mart, local sales and Internet for the now popular i-phone.
4. Problems With Economic Measurements Over Time 5 min video
Because CPI A isThe graph shows higher, nominal wages are adjusted lowered. Changing buying habits by price helped 15 points with CPI-U-RS and 29 points with PCE A.
While the Federal Reserve considers the PCE A best for measuring the affects of inflation many use the others bring truth to the statement their are liars, darn liars and statisticians. Editor's Note: This paper by Bruce Sacerdote is worth noting:
C. Workers receive more than
income: compensation compared to
Unit V. Review
Worker Compensation has Increased Even More
About 20 years ago I read where people concerned over the budget wanted to tie government
salaries and SS to a more realistic measure of inflation and I was not
surprised when government employees making the decision took about ten
to make the change.
SS still uses a CPI Index to adjust benefits which gives recipients a bonus. "...many economists, ...conclude that the CPI overstates inflation." "... only some of the upward bias in the CPI have been eliminated."
"The Chained C-CPI-U
is another step toward eliminating the
Recently when the IRS came under fire for going after conservative non profits I thought the reason was they thought liberal would want more government, more employees, more promotions ...
Misery Index and Long-Term Secular Trends
Inflation Often Determines Interest Rates
Interest Rates Since1800 What's Next?
Source nice graph useless analysis
Real Per Capita GDP The Best Measure of Our Economic System
Editors Note: Current 2014 economic unhappiness with our economy blames capitalism when distribution of income and solving economic related problems in a democratic republic is the job of the people and their government.
Discretionary Spending is Down Because
People Will Always Think Prices Are Too High
Stock Prices Continually Up
Reason Is Profits Are Continually Up
Interest Rates Were Constant Until We
Decided to Print Money
source has much more recent data
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