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Boom and bust

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Boom and bust

This article is about periods of rapid growth with an increase in investment and consumption and that are followed by sudden collapses in economic activity. For a more general description of fluctuations in economic activity, see Business cycle.

In economics, the term Boom and bust describes a time period characterized by sustained increases in several economic indicators followed Template:Vanchor[1] It is in reference Template:Vanchor[2] The phrase “boom Template:Vanchor[3] Times of increased business and investment have collapsed leaving widespread poverty such as the depressions of 1837 and Template:Vanchor[4] For example, in the early 1800s in Ohio people were buying land on credit to sell at twice the price but land became too expensive to buy. At the same time, wheat prices became too low to transport wheat to market. Wheat was $1.50 per bushel in 1816; Template:Vanchor[5] In 1894 someone wrote, “Of course it stood to reason that the music hall boom would bust sooner or later . . . In fact the boom has busted and according to the published balance sheet the Alhambra has suffered as much Template:Vanchor[6] Business leaders such as automaker Paul Hoffman have used the phrase in calling for increased civic responsibility toward taming the business cycle; he also said, “we cannot live with a crash” in reference to 26 depressions over 100 years Template:Vanchor[7] Some authors have used “boom and bust” Template:Vanchor[8] Other ways of saying unwanted changes sales have been Template:Vanchor[9] William Forbes uses the phrase in his textbook on finance, in which he identifies credit characteristics of boom and of bust:

1. Indicators of boom include banks extending more credit

  • for domestic consumption activities
  • for “investments” in the commodities, stock, and housing markets
  • and for imports of goods made in developing countries

2. Indicators of bust include banks extending less credit

  • from lower domestic consumption activities and resulting unemployment
  • from fewer investments made
  • from less demand for imports causing companies in developing countries to have trouble paying their loans
  • and from bank portfolio deterioration from non-performing loans; for example, there was a credit boom and bust in the Template:Vanchor[1] In 1956 Changing Times blamed boom and bust on demand being too high and too low, with business needing to sell things to customers and customers needing Template:Vanchor[10] In the early 21st century, after entire poor neighborhoods in U. S. cities were evicted from their homes, Edward M. Gramlich used “boom and bust” in the title of his book about the decline of anti-usury laws Template:Vanchor[11]

See also

Case studies:

References


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