The origin of economic cycles

How the economic machine works

http://www.economicprinciples.org

Economy is made up of a sum of numerous repeated transactions, which are driven by human nature. All forces and all cycles are driven by transactions!!!

Economy consists of all of the transactions in all of its markets. 3 main forces that drive the economy: productivity growth, short term (5-8 years) and long term (75-100 years) debt cycles. Lay these forces on top of each other to track economic movements.

To understand the economy all you need to know is: Total spending (money+cash) / total quantity (goods, services, financial assets) sold in all of the markets = PRICE.

Total amount of spending drives the economy and credit created out of thin air is able to increase the spending.

Borrowing and credit combined are the root of all evil.

Credit spends just like money. Borrowing and credit is the reason for cycles!!! Borrowing allows to increase the spending, more we borrow, more we can spend and spending drives the economy. When we borrow, we spend more - cycle rises because the spending (and income) rises faster than productivity.

When the amount of spending and income grow faster than the production of goods (services), prices rise and inflation happens!!! Central bank controls the inflation, seeing prices rise, it raises interests rates to reduce the amount of credit aiming to slow down spending and inflation.