Business Cycles (Part 1/2 - Phases) - YouTube

Business cycles

Cycles are pattern that repeat over a period of time. There are various cycles ranging

from weather patterns at global level to emotional cycles at individual level. When we talk of

finance a very important cycle to understand is business cycle, it is also called Economic

cycle. It gives insight to flow of money and its effect on people, businesses, markets

and economies.

There are four main phases of business cycles. These are: -

1. Inflation 2. Recession

3. Depression 4. Recovery

But for this video we'll break business cycle into six main phases. These are: -

1. Inflation 2. Peak

3. Burst 4. Recession

5. Depression 6. Recovery

Phase 1 : Inflation

It is the period in which things look positive, there is good news every where. People are

positive about themselves and their future, thus they spend on things they love like:

- wine, women, cars, houses, etc (mostly on consumable items). This creates lot of demand

for goods and resources, thus businesses expand quickly, hiring more and more people. Soon

there is so much demand in market that it is difficult to find workers and people are

paid with higher and higher salaries which lead to increase in standard of living. The

growth is also visible on rising stocks markets, commodities, real estate, etc.

Phase 2 : Peak

In this period things looks awosome, where ever you look, its wonderfull, whatever you'll

hear, is great news, its party time (its b'day) for everyone. There is so much demand for

investments, workers, resoures that every sector of market is zooming. Stocks markets

are higher like never before, people spend lavishly on expensive wines, premium cars,

pent houses, prostitues, etc. Businesses take more and more risks with bigger and bigger

investment. They invest heavily in new ventures and pay lavish salaries to retain or hire

workers. Soon one of sectors climb rapidly and every one want to get in "once in a life

time opportunity", the prices move up so fast that they double in few days, making people

go crazy and they invest with there life savings or hefty loans. There is so much money to

be make that 'nothing can go wrong'.

We'll cover other phases of business cycle in our next video as we don't want to make

ths video lengthy.

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