ONE thing we are certain to say about this business cycle is that it is unique. Normally, three years into an expansion, interest rates are rising, capacity utilization is up substantially, and rising commodity prices are pushing up the inflation rate. None of these things are happening currently. Interest rates have been coming down for several months, capacity utilization remains stuck in the low 80s (percent), and commodity prices have been dropping for several months.
The Federal Reserve, in loosening up on the credit reins, has given a clear signal that it wants at all costs to avoid another recession right now.
What is going on is a global phenomenon, and it can't be understood solely from looking at the domestic economy. The whole world apparently thought growth would be faster in the 1980s than it has been. But it was extrapolating growth rates from what had been happening during the inflationary 1970s, when business and consumer psychology, stung by the various oil crises from 1973 to 1979, got used to thinking in terms of shortages.
This period isn't going to last forever, either. The hard thing is to pinpoint what may change the outlook for faster growth again. One factor inhibiting growth around the world has been the number of austerity packages imposed by the International Monetary Fund on third-world countries that have substantial foreign debt. There are skeptics who have been saying that the world would have to inflate its way out of the debt that has been created in the banking system. That is, they think there needs to be a major increase in the supply of currencies around the world, which would make it easier to service the debt accumulated when money was worth more.