Business cycles are a part of every capitalistic economy. In fact, there is reference to a business cycle in the bible, as explained by Joseph, the son of Jacob. Joseph had the ability to interpret dreams into real life occurring prophesies. On one instance, Joseph interpreted the dream of the Pharaoh of Egypt. The Pharaoh “dreamt of seven lean cows which rose out of the river and devoured seven fat cows; and, of seven withered ears of grain which devoured seven fat ears.” Joseph interpreted that the dream meant there would be seven years of bad economic times (famines). In these hard times, the Egyptian and surrounding kingdoms would be in an economic slump. However, Joseph interpreted that after the seven years of hard time, seven years of prosperity (economic expansion) would arrive to all of the known lands. Both the good and bad economic times as described by Joseph show a pattern, and it is not a stretch to say that Joseph is actually describing a business cycle. Business cycles, as characterized by Joseph, show that there will be periods of economic gains and periods of economic sufferings.
Now to more recent times, when my mom was born in the 1930s the US economy was not doing very well. In fact, the economy was in a depression. Unemployment was high and the average family income was reduced by 40 percent. Moreover, when I was born in the 1970s, thankfully, the economy was not as bad as it was in my mom’s day. However, the decade of the 1970s one was of the worst economic decades in the history of America. As a matter of fact, inflation increased by 6 percent a year in the 1970s. This period of our economic past is known as the stagflation period because unemployment and inflation increased yearly. As of today, the American economy is better than it was in the 1930s or 1970s, but the economy is not doing as well as it has in good economic times. For instance, currently, personal disposable income has decreased. Yes, GDP has grown by 1.3 percent for the second quarter of 2011 but the current unemployment rate is 9.1 percent. These numbers are not great, but they at least show that economic growth is occurring.
As for recessions in general, the last recession in America began in December of 2007 and ended June of 2009. American recessions have a historically lasted from about six months to a few years, except for the Great Depression which lasted a total of 43 months. Recessions are countered by economic expansions, which typically last longer than recessions. To make a point, America throughout its history has been in more economic expansions than in recessions, with the longest expansionary period lasting for 120 consecutive months.