IT PAYS TO KNOW: What Is a Business Cycle?

By JUDD MATSUNAGA, Esq.

For many Rafu Shimpo readers, their minds “shut off” when the business news comes on, e.g., “interest rate hikes,” “jobless claims on the rise,” “Federal Reserve meetings,” “consumer needs changing,” etc. etc. However, understanding the different phases of a business cycle can help us make important life decisions.

Think of business cycles like the tides to an ocean: a natural, never-ending ebb and flow from high tide to low tide. And the same way the waves can suddenly seem to surge even when the tide’s going out or seem low when the tide’s coming in, there can be interim, contrarian bumps — either up or down — in the midst of particular phase.

All business cycles are “book-ended” by a sustained period of economic growth, followed by a sustained period of economic decline. Throughout its life, a business cycle, also referred to as a economic cycle, goes through four identifiable stages, known as…

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