What causes the cycle of boom, recession and recovery?

Question

What directly causes each part of that cycle? How is "confidence" measured and quantified? What causes loss of confidence?

Answer 1

What causes economic cycles?

What causes the weather?



The same thing in both cases: a chaotic system, which naturally goes through aperiodic cycles that differ every time. History doesn't repeat itself exactly, though there are certainly patterns that can be spotted.



As for confidence, that's a mass psychological variable and difficult to pin down.

Answer 2

Ebb and flow. However, this one is different. The job makers are under attack. No benefit to growing. Gov't moving in hard on regulating every aspect of our economy... health, money, education. Recessions can last a long long time. This one seems to be holding. Why? Because the banks haven't flushed all foreclosures, folks are over-taxed, average pay rolls are down. New jobs are not keeping up with population growth, international markets are tanking, China is a mess. Other than that... a recession can hold. Boom? Spotty at best for the next 5-10 years.

Answer 3

A lot of things actually. This is the whole idea of the mortgage baloon, which broke and casue the recession of many people.

See some example - milions of workers in USA, GB, Canada and so on, work for 1000 monthly and they buy things for 10000, which means that they should pay 500 monthly (half of their income). When they decide to find better work, they leave the current job and laft with deficits of 500 monthly. If their seach is with no success for 6 months, they will lose everything and will have a serious debt to the banks. Actually they will get higher rated loans to repay the previour loan and this is the first, second and so on mortgage. The main reason for this recession is living in debt.

Answer 4

Im pretty sure that a Labour Government contributes to the recession part of the cycle, didn't it happen last time we had one?

Pretty much proved by the fact thats been in the news today that the UK is going to be the economy which retracts the most in the developed world.