Quote:
Originally Posted by DGthe3
I wasn't refering to general cycles at all. I was talking about what would have happened had GM gone under.
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Business cycles, which is what I'm assuming you are calling general cycles, are recurring trends that involve booms/busts or prosperity/decline. Economists try to predict future economic fluctuations based on their school's business cycle theory. It was claimed by the New Keynesians that the failure of GM (and other TARP assets) would have caused a depression; Blinder, one of the best Keynesian economists, reasoned unemployment would reach near 16% if intervention was not taken.
What would have happened if TARP was not enacted, and the bankrupt companies such as GM, AIG, etc. were to liquidate, is a recession according to the National Bureau of Economic Research's definitions. This is only due to one reason: they see recessions as economic disorders that can be avoided instead of healthy, necessary readjustments of the market. The market was clearing itself of these failed institutions, until they were propped back up through the joint action of the Fed and Congress. The problem with these bailouts is even if they are "successful," as in they are successful in starting another bubble, it only prolongs the inevitable; the market will rid itself of these malinvestements one way or another. As I said before, there are no inherent instabilities in the free market; booms/busts are the result of government intervention. The problem with most economics is that they tend to look at the bust instead of the boom, considering they see a problem where there is none.
In short, when you refer to the possibilities of economic prosperity or decline, due to whatever reason, you are referring to business cycles.