When stock prices imploded during the recent recession, more than a few corporate leaders, in their panic to explain dramatic losses to shareholders (particularly while it was still early in the recession cycle), found the opportunity to suddenly and publicly question other officers for minute or nonexistent infractions.
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This is not your typical recession recovery cycle.
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The high yield spread versus Treasuries is 162 basis points (bp) wider than it was when the economy was already one month into recession in the last cycle.
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So the flexibility usually enjoyed by a sovereign country to run budget deficits in a recession to counterbalance the business cycle is virtually nonexistent.
In the same 25-year time span only two times have the analysts been too bearish compared to actual earnings, and this was in the recovery phase of the business cycle after a recession.
Rather than explaining the cycle in terms of market failure, as Keynes did, real business-cycle theory views a recession as the optimal response by households and firms to a shift in productivity.
That could imply that the recession that the accepted authority, the Business Cycle Dating Committee of the nonprofit National Bureau of Economic Research, pinpointed as commencing in December 2007, is still underway.
But to the naysayers calling for a recession this year, I acknowledge that the business cycle is getting longer in the tooth, but ask: Where are the excesses in the system?
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Unless you believe a recession is around the corner, the energy and metals cycle could last and last.
Look for cutbacks in landlines and slower growth in wireless, but the next recession impacts should be far milder than the last business cycle.
The exuberance of recent months might turn out to be well founded, if the fourth quarter of 2012 turns out to be the low-point of Europe's recession, and falling borrowing costs start to produce a virtuous cycle from higher confidence to improving growth.
It certainly seems as though people see the current recession as more than just a down period in the normal business cycle.
First, the compensation increase, effective Jan. 1, 2011, is 2.5% (2% increase in minimums and 0.5% increase in pension and health contributions), significantly less than the 3.5% that was agreed to in the last negotiating cycle, which began before the economy had spiraled into recession.
This virtuous cycle reinforces itself and can pull an economy out of a recession.
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The group uses several factors to determine peaks and troughs of the business cycle, but its methodology has the disadvantage of revealing a recession months after it has passed.
Last week, it felt as if this scenario was beginning to be tested as investors seemed to begin to value stocks not on recession earnings, but rather on normalized earning power over the next recovery cycle.
This year, as global economies again slow significantly, central banks outside of the U.S. again seem content, or at least resigned, to letting the business and economic cycle play out, even though it likely means a global recession.
But if asset price inflation turns to asset price deflation first, bringing about recession, then goods and services inflation is pre-empted in the immediate cycle.
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Government support to the banking system can break the cycle of panic and pessimism that threatens to suck the economy into deep recession.
She is also a member of the Bureau's Business Cycle Dating Committee--the body charged with officially determining when a recession has started and ended--experience which will serve her well as she advises me on our current economic challenges.
Much of that feeble growth will come from a turnaround in the inventory cycle as companies stop de-stocking at the scary rate that exacerbated the recession in 2009.
Its business cycle dating committee, which is considered the arbiter of whether the US is in recession, met on Friday to make the decision.
The current monetary inflation that is the Bernanke boom-bust-to-be is already multiples larger than the monetary inflation that produced the tech bust and, at this point in the boom-bust cycle, even larger than the inflationary surge that gave us the housing bust turn Great Recession.
These ideas are based on my assumption that we are in a stock market down cycle that will continue for some time, as well as on the growing possibility of a new recession.
As the U.S. economy emerges from the worst recession since the Great D epression, many banks have repaid their TARP borrowings and appear poised for the economic recovery cycle.
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