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Recession possibility

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To what extent are we now at what must be near the end of the longest business cycle expansion in U.S. history?

Business Cycle
Business Development
Business Growth
Ali Qudrat
3 months ago

3 answers

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There is little evidence that the risk of recession rises simply as a function of the length of the previous expansion. Given this, nobody really knows when the next recession might come. What we can know is what factors have triggered past recessions—and how likely these are to recur in the near future.
The common root cause of each recession is a contraction of economywide spending (or aggregate demand) relative to the economy’s potential productive capacity. As consumers (households, businesses, or governments) cut back their spending, it doesn’t make sense for producers to keep generating as much economic output. As a result, these producers make cuts to their workforce and let their capital stocks fall idle.

Recessions are caused across the board by a shortfall of aggregate demand relative to the economy’s potential. Ending a recession, therefore, requires replenishing aggregate demand.
The most specific causes of aggregate demand contractions, and resulting recessions, in the post–World War II period have been fiscal contractions (often caused by military spending drawdowns), monetary policy tightening (the Federal Reserve overshooting in attempts to fight inflation by raising interest rates too high), and popping asset market bubbles. Below, we examine each of these past causes in turn, to consider whether any of these threaten to derail the expansion in coming years.

David Cottrell
3 months ago
David Cottrell As always, a well scripted and educated response. - Vic 3 months ago
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Well, I think if Trump continues his favorite trade wars, no one should doubt about the recession in the US in near future.

Hassan Qudrat-Ullah
3 months ago
Trump is winning the trade wars abd its long past due that America change the trade agreements that never benefited us. If democrats regain power expect a recession and an explosion of debt. - Robert 3 months ago
Disappointing commentary on both sides, especially in a VCAB community looking for knowledge vs. opinion sharing. See David Cottrell’s response for an educated economic reply. - Vic 3 months ago
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If democrats regain power they will increase taxes take control of the economy and create the next recession. They created the last one when Carter passed the CRA that mandated banks make quotas of bad loans to force them to grant mortgages to blacks. That failed. When Obama left office GDP declined to 1.2% and we were heading back to recession. Trump reversed that with tax cuts and canceling 1000s of regulations. Recessions are caused by government trying to control the economy. The less they do the better off we are. Trump has proved that Reagan proved that and JFK proved that.

Robert Hafetz MS
3 months ago

Have some input?