![]() ![]() Real World Examples of a Goldilocks Economy A Goldilocks state is ideal for investing because as companies grow and generate positive earnings, stocks perform well. Steady gross domestic product (GDP) or economic growth is the most cited indicator of the Goldilocks economy.Low inflation, measured by the quantitative-based-based on a number-consumer price index (CPI) and the producer price index (PPI).An increase in asset prices-known as asset price inflation-of stocks, derivatives, bonds, real estate, and other assets.A low unemployment rate – estimated somewhere around 4-5%.The ideal conditions are typically characterized by: Hence, there has always been some debate among economists as to what the exact characteristics of a Goldilocks economy are but it’s safe to say there should be a balance between growth, employment, and inflation in a Goldilocks economy. The term includes a clever pun since the term “bears” describes stock traders who believe the market is declining or entering a bear market. That means higher interest rates, which stock traders and businesses dislike because of their negative impact on profit margins. In it, he described the economy during the Clinton administration, where the economy was hot enough to spur profitable business growth but cool enough to keep the Federal Reserve Bank (of the USA) from using contractionary monetary policy to keep inflation at bay. The term has been coined by David Shulman, senior economist of the UCLA Anderson Forecast, who wrote an article in 1992 called “The Goldilocks Economy: Keeping the Bears at Bay.” However, growth is not so hot as to push it into an inflationary status. A Goldilocks economy is warm enough with steady economic growth to prevent a recession. The economy is not expanding or contracting by a large margin. In this perfect state, there is full employment, economic stability, and stable growth. ![]() The term describes an ideal state for an economic system. Interpretation of economic data turns a little more fun when said data is compared to components of a fairy tale.This week’s TOTW introduces one such magical term.Īs told by Investopedia, a Goldilocks economy is not too hot or too cold but just right-to steal a line from the popular children’s story Goldilocks and the Three Bears. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |