Tuesday, July 2, 2013

Economic Cycles

Economic cycles have been around a very long time. They also have nothing to do with capitalism. I was not surprised when we have economic expansions and contractions recently. Actually no one seems to be surprised at economic expansions, but they seem shocked when we have economic contractions.

If you ever read the bible you would have heard the story of the dream of the Egypt pharaoh having a dream of 7 good years followed by 7 bad years. If you read anything about the middle ages in Europe, and most people have, there were also good years and bad years.

A number of cycles have been identified although there are lots of arguments about they exist or the details of the cycles. There is the presidential 4 year cycle people talk about. However, there was a 4 year economic cycle in Britain before a 4 year cycle was recognized in the US. There is the Business Cycle. You can read about it at Wikipedia. There is also the Kondratiev Cycle and this is also referenced in Wikipedia.

Economist and governments have been trying to get rid of these cycles, but they seem only to manage to damage the expansion part of cycles, especially the business cycle. They cannot stopped them or stop the contractions.

Perhaps if more people were aware of such cycles, they would not try to blame someone for them. Every time there is a contraction, people always try to find someone to blame. This is rather fruitless. What we should do is expect them and deal with them.

I invest in the stock market. I expect that they will be expansions and contractions. The contractions do not bother me, nor do I try to blame someone for them. I have invested in good companies and I just go with the flow. (Although, I must admit that when the stock market contracts I tend not to look at my portfolio. Why worry unnecessarily. I know that the contractions will pass and that another expansion will happen.)

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

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