Soft landing
Encyclopedia
A soft landing in the business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

 is the process of an economy shifting from growth to slow-growth to potentially flat, as it approaches but avoids a recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...

. It is usually caused by government attempts to slow down inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

. The criteria for distinguishing between a hard
Hard landing (economics)
A hard landing in the business cycle is an economy rapidly shifting from growth to slow-growth to flat as it approaches a recession, usually caused by government attempts to slow down inflation...

and soft landing are numerous and subjective.

The term was adapted to economics from its origins in the early days of flight
Flight
Flight is the process by which an object moves either through an atmosphere or beyond it by generating lift or propulsive thrust, or aerostatically using buoyancy, or by simple ballistic movement....

, when it historically was the method of the landing
Landing
thumb|A [[Mute Swan]] alighting. Note the ruffled feathers on top of the wings indicate that the swan is flying at the [[Stall |stall]]ing speed...

 of hot air balloon
Hot air balloon
The hot air balloon is the oldest successful human-carrying flight technology. It is in a class of aircraft known as balloon aircraft. On November 21, 1783, in Paris, France, the first untethered manned flight was made by Jean-François Pilâtre de Rozier and François Laurent d'Arlandes in a hot air...

s, by gradually reducing their buoyancy
Buoyancy
In physics, buoyancy is a force exerted by a fluid that opposes an object's weight. In a column of fluid, pressure increases with depth as a result of the weight of the overlying fluid. Thus a column of fluid, or an object submerged in the fluid, experiences greater pressure at the bottom of the...

. It later also applied to aviation
Aviation
Aviation is the design, development, production, operation, and use of aircraft, especially heavier-than-air aircraft. Aviation is derived from avis, the Latin word for bird.-History:...

, gliders
Glider aircraft
Glider aircraft are heavier-than-air craft that are supported in flight by the dynamic reaction of the air against their lifting surfaces, and whose free flight does not depend on an engine. Mostly these types of aircraft are intended for routine operation without engines, though engine failure can...

 and spacecraft
Spacecraft
A spacecraft or spaceship is a craft or machine designed for spaceflight. Spacecraft are used for a variety of purposes, including communications, earth observation, meteorology, navigation, planetary exploration and transportation of humans and cargo....

, as in the Lunar lander
Lunar lander
Lunar lander or Moon lander may refer to:* Apollo Lunar Module, used for the 1969-1972 human spaceflight program of the United States* LK Lander, designed for the human spaceflight program of the Soviet Union...

.

In the United States, modern recessions and hard and soft landings follow from Federal Reserve tightening cycles, in which the Federal funds rate
Federal funds rate
In the United States, the federal funds rate is the interest rate at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. Institutions with surplus balances in their accounts lend...

 is increased over several consecutive moves. In modern times, the most notable, and possibly the only true soft landing in the most recent 16 business cycles occurred in the soft landing of 1994, engineered by Federal Reserve Chairman Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...

 through fine tuning of interest rates and the money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...

.

In addition to being a certain type of business cycle, a soft landing may also refer to a market segment
Market segment
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function...

 or industry sector that is expected to slow down, but to not crash, while the wider economy may not experience such a slow down at that time. For example, a contemporary newspaper headline read: "Soft landing forecast for house prices as rate hikes stem growth".
As it stands, these forecasts have very little scientific value and there is not one single verifiable instance of a soft landing following an economic bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

. Similar claims were made repeatedly by vested interests (VIs) about the prospects for the housing market in The U.S. but there is now an almost unanimous consensus that the United States housing bubble
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...

is undergoing a significant market crash.
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK