Warren B. Lammert, a seasoned financial expert and former principal at Granite Point Capital, brings a wealth of knowledge and experience in investing, finance, and economic history. Based in San Juan, Puerto Rico, Mr. Lammert has played influential roles in both the business and nonprofit worlds. He currently serves as Chairman of Tevard Biosciences and has overseen successful ventures like Engage Therapeutics and Biscayne Neurotherapeutics.
His interests span innovation, behavioral finance, and venture capital, particularly in the healthcare and biotech sectors. With leadership experience in national epilepsy advocacy and philanthropic organizations such as the Epilepsy Foundation and the Epilepsy Therapy Project, Mr. Lammert offers a unique perspective that blends financial acumen with social impact. His understanding of the business cycle reflects a deep commitment to economic literacy and strategic foresight.
Also known as economic cycles, business cycles describe the patterns and fluctuations that define a country’s overall economic activity. Business cycles are defined by periods of expansion that generally impact multiple segments of the economy at the same time, followed by instances of economic contraction. This up and down pattern occurs repeatedly, though not necessarily at set intervals.
A complete business cycle begins with a nation experiencing peak economic performance. The peak is followed by a contractionary period that may qualify as a recession. If the recession has a prolonged impact on the economy, it may reach the point of a depression, which bottoms out at the trough, the opposite of an economic peak. Following the trough, a depression enters into a recovery period and finally begins expanding until it hits peak performance once again.
Business cycles can be observed at every level of a nation’s economic activity. In addition to overall output, cycles describe cyclical upswings and downturns in employment, average income, and sales figures. While a healthy economy experiences periods of both expansion and contraction, contraction can signal the start of a recession and potentially an economic depression.
Pundits track economic expansion and contraction in several ways. Gross domestic product (GDP), a measurement of a nation’s aggregate production, is a strong indicator of where an economy exists within the business cycle, as do related figures, such as inflation. The business cycle is also influenced by industrial production levels and other categories – as mentioned, employment and income can indicate whether the business cycle is approaching a business cycle peak or a trough. These metrics can also be used in hindsight to place dates on when the business cycle turned up or down.
Business leaders often refer to the business cycle to prepare for or navigate a recession, though they may adhere to certain myths regarding business cycles and recessions. For instance, a period of contraction is not synonymous with a recession, nor does it indicate that an economy will enter into a recession in the near future. Similarly, some economists, including those representing the National Bureau of Economic Research (NBER), may say that two consecutive quarters of GDP decline equates to a recession, but this is not the case.
While recessions do occur during contractionary periods, they do not account for the entirety of an economic contraction. The NBER Business Cycle Dating Committee provides a more generalized and widely accepted definition of a recession as a “significant decline in economic activity spread across the economy.” A contractionary period must last for several months before it can be termed a recession and should involve visible impacts on production levels, unemployment rates, and average incomes, among other factors.
A depression primarily differs from a recession by severity and time. The economic decline must be significant and sustained, in some cases lasting for several years. Unemployment rates may reach historical highs, alongside negative GDP growth. The decline into a depression is known as a vicious cycle.
As a depression ends, the business cycle can be described as a virtuous cycle. That said, in the same way that a contraction does not necessarily mean a recession, a recovering economy can only be characterized as expanding when it becomes self-feeding, or self-sufficient, meaning it can exist with little to no input from foreign markets.
