muses of the moment

October 25, 2010

another look at business cycles

Filed under: Dollar Crisis, Economic Crisis — totallygroovygirlfriday @ 2:40 am

Click here for Edward Hugh’s analysis of the next 30 years.

…looks at the extent to which a variety of macro indicators – like GDP growth, inflation rate, equity yields, etc – may have been influenced by demographic forces over the last 100 years or so. It is certainly one of the most systematic reports of its kind I have seen…

Our researchers then go on to take a look at the the average and median length of the 33 business cycles the US economy has seen since 1854. For the overall period they found the average cycle from peak to peak (or trough to trough) lasted 56 months (or 4.7 years). However, the averages are boosted by an occasional elongated “superbusiness cycle”, and thus the median length is a much smaller 44 months (3.7 years).

Groovygirl says: this sounds vaguely familiar….can you say Martin Armstrong? Slightly off of pi, but close.

Now, without dwelling on the gory details, if we look at the spread between the upside, median, and downside cases, we could pretty rapidly come to the conclusion that the next US recession has a high probability of starting sometime between next summer, and the summer of 2012 – which, as you will appreciate, isn’t that far away. I am also pretty damn sure that Ben Bernanke and his colleagues over at the Federal Reserve appreciate this point only too well, and hence their imminent decision on more easing, since a recession hitting the US anytime from next summer will really come like a jug of very icy water on that very fragile US labour market, not to mention the ugly way in which it might interact with the US political cycle.

Interesting post.

At the same time, two of the world’s largest economies – Germany and Japan – have very old populations, which effectively means (to cut a long story short) they suffer from weak domestic demand, and need (need, not feel like) to generate significant export surpluses to get GDP growth and meet their commitments to their elderly population. The very existence of these surpluses also produces tensions, and demands for them to be reduced. But this is just not possible for them, and Japan is the clearest case.

side musing: from the Mogambo, click here. “The Fed has gone insane, so I will just pick up some more gold and silver.” Good plan, Richard.

side-side musing: a 41-page paper from smartknowledgeu explaining what money really is, and why you should own gold in this monetary crisis. Click here.

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