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The Cycling Economy

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The article that I have chosen to analyze is entitled “Political Pressure Wouldn’t Halt More Fed Easing” written by Scott Lanman and published last October 5, 2011 in Bloomberg. Federal Reserve Chairman indicated that he would continue to use monetary policies to stimulate economic activity, which is primarily reflected upon interest rates. This is amidst the probable recession for the US due to its debt debacle and credit downgrading which triggered a panic-stricken market.

As many economists have already noted, the leading indicator for a recession, or a downturn of the US economy is the growth of Gross Domestic Product (GDP). GDP is the increase in the amount of goods and services produced by an economy over time. According to the Economic Cycle Research Institute (ECRI), more than three years ago, the 2008 financial crisis already triggered studies on longstanding pattern of slowing growth, characterized by higher cyclical volatility and lower trend growth. In layman’s terms, in the short run, we may be having higher upswings of economic growth but at the cost of having equally strong downswings which are hard to anticipate. However, when you try to see patterns as far as from 1970, the long-run trend is down. A part of this trend is shown on the graph below:

As one can notice, there was a steep upward change in GDP growth by the end of the 3rd quarter in 2009. The GDP growth figures for 2011 is 2.2% and 1.6% for eth 1st quarter and the 2nd quarter respectively. The graph above may be misleading insofar as it suggests an upward sloping imaginary trend line, but as far as the ECRI is concerned, two implications are possible: First, the fall of GDP will even be steeper than perhaps the -5% in the 2nd quarter of 2009. Th...

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...conomics.com/gdp-growth-rates-list-by-country

Works Cited

Lanman, Scott. (2011). Bernanake Signal Political Pressure Wouldn’t halt More Easing. Bloomberg News. Retrieved from http://www.bloomberg.com/news/2011-10-05/bernanke-signals-pressure-from-congress-wouldn-t-halt-additional-easing.html

Economic Cycle Research Institute. (2011). Retrieved from http://www.businesscycle.com/reports_indexes/reportsummarydetails/1091

Bureau of Labor and Statistics. Unemployment Data. Retrieved from http://data.bls.gov/timeseries/LNS14000000

Inflationdata.com. Inflation data. Retrieved from http://inflationdata.com/inflation/inflation_rate/currentinflation.asp

Federal Reserve. Interest Rates Data. Retrieved from http://www.federalreserve.gov/Releases/h15/data.htm

Tradingeconomics.com. GDP data. Retrieved from http://www.tradingeconomics.com/gdp-growth-rates-list-by-country
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