Is The Business Cycle Dead?
June 30, 1998
That's the question being asked at Federal Reserve meetings around the country.
It's being prompted by perhaps the best set of U.S. economic circumstances ever: growth is strong, inflation is low and unemployment is lower than it has been in 28 years. The current business expansion is in its eighth year -- the longest in peacetime history -- and does not show signs of slacking off.
Economists say the current recovery is unique in some other ways:
- Most recoveries start off strong and end weak.
- This one started weak and in recent years has gotten stronger.
- Inflation tends to rise as an economic cycle ages -- but this time it has fallen.
- A number of the old economic indicators -- which experts relied upon in the past to signal an approaching recession -- no longer seem to work.
Analysts blame the short but wicked recession which lasted from July 1990 to March 1991 on the tax hikes enacted by Congress and the Bush administration. A series of new costly regulations -- the Americans with Disabilities Act, new clean air rules and tighter banking regulations, among others -- hit the economy at the same time and were undoubtedly factors prompting the slowdown.
Some economists contend that as long as politicians have the power to make blunders, the business cycle will be with us.
Source: Perspective, "Up and Down No More?" Investor's Business Daily, June 30, 1998.
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