The idea is that things cannot be good or bad forever. For instance, a weak economy forces unemployment to rise. But business costs are also declining during such times. Margins improve (feedback) and business eventually feels more comfortable in hiring and expanding production.
The same concept applies when the economy is strong as it is now. But business costs rise (commodities, wages, interest rates) squeezing margins (feedback). Business become more cautious and economic activity declines.
Economic feedback is what keeps the economy from growing too rapidly or contracting too severely -- unless governments intervene with unrealistic regulations creating market distortions. But eventually the business cycle reasserts itself because of the powerful economic feedback forces.
Editor, The Peter Dag Portfolio. Since 1977
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