Some geezer won the nobel prize explaining what causes the business cycle.
It seems to be based on innovation, and the start of the business cycle occurs after recession seems to be based on businesses catching onto the greater profits from knocked down assets, cheaper labour , cheaper land, even though money is often more expensive, with this innovation having the 'fertile soil' to catch on as costs drop and business investment grows rapidly.
For instance, when Robert Stevenson demostrated the steam powered rocket, in 1829 in Rainhill, Liverpool as part of a competition held by the Liverpool to Manchester Railway company, what followed was a railway boom changing the face of the economy forever. Transport costs dropped and many goods and foods became available for the first time. The standard fo living shot up in a decade. Huge 'landlord' economies which depended on lots of ever cheaper labour to produce, like Russia, or even China/India found thier share of world markets collapsed as a vast array of value added goods hit world markets partly due to this infrastructure innovation creating other innnovations in the UK.
The Railway boom lasted from 1830 to 1840 before collapsing because of a financial crisis, a run on the pound and too many small railways. A uncontrolled, chaotic expansion of credit in the US and printed currency in the UK creates a major crisis in the terms of trade and banking. The crisis leads to a depression in the economy which lasts until 1843 as the damage is unwound in both countries by shutting down the money supply.
However, In 1844 cheap money was available for knocked down assets
: the lending rate had been cut to 3¼%. Also, the 1844 Bank Charter Act created stability and confidence in the pound.
The result was a great deal of wild speculation on railway construction!
Here then are two business cycles. A recession was needed in the industry so that all the smaller railway lines and assets could be bought at knockdown prices cheaply with 'free money' and then consolodated into one functioning mainline system. At one stage 33% of the railway was owned by one stock speculator.
I hope this illuminates what a business cycle is all about - its all about investment.
Now Meryvn King expects business investment to pick up where the consumer left off. I don't think we quite have the right climate somehow.