A soft landing in the

business cycle Business cycles are intervals of Economic expansion, expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are ...

is the process of an economy shifting from growth to slow-growth to potentially flat, as it approaches but avoids a

recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...

. It is usually caused by government attempts to slow down

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

. The criteria for distinguishing between a ''

hard Hard may refer to: * Hardness, resistance of physical materials to deformation or fracture * Hard water, water with high mineral content Arts and entertainment * ''Hard'' (TV series), a French TV series * Hard (band), a Hungarian hard rock supe ...

'' and ''soft'' landing are numerous and subjective. The term was adapted to economics from its origins in the early days of

flight Flight or flying is the process by which an object moves through a space without contacting any planetary surface, either within an atmosphere (i.e. air flight or aviation) or through the vacuum of outer space (i.e. spaceflight). This can be a ...

, when it historically was the method of the

landing Landing is the last part of a flight, where a flying animal, aircraft, or spacecraft returns to the ground. When the flying object returns to water, the process is called alighting, although it is commonly called "landing", "touchdown" or ...

hot air balloon A hot air balloon is a lighter-than-air aircraft consisting of a bag, called an envelope, which contains heated air. Suspended beneath is a gondola or wicker basket (in some long-distance or high-altitude balloons, a capsule), which carries p ...

s, by gradually reducing their

buoyancy Buoyancy (), or upthrust, is an upward force exerted by a fluid that opposes the weight of a partially or fully immersed object. In a column of fluid, pressure increases with depth as a result of the weight of the overlying fluid. Thus the p ...

. It later also applied to

aviation Aviation includes the activities surrounding mechanical flight and the aircraft industry. ''Aircraft'' includes fixed-wing and rotary-wing types, morphable wings, wing-less lifting bodies, as well as lighter-than-air craft such as hot air ...

, gliders and

spacecraft A spacecraft is a vehicle or machine designed to fly in outer space. A type of artificial satellite, spacecraft are used for a variety of purposes, including communications, Earth observation, meteorology, navigation, space colonization, p ...

, as in the Lunar lander. In the United States, modern recessions and hard and soft landings follow from

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

tightening cycles, in which the

Federal funds rate In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. Reserve balances a ...

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

Chairman

Alan Greenspan Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...

through fine tuning of interest rates and the

money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...

.Whither Goldilocks?
The Big Picture, September 22, 2006 , Sources: Business Outlook Survey, Federal Reserve Bank of Philadelphia September 2006, http://www.phil.frb.org/files/bos/bos0906.html , U.S. LEADING ECONOMIC INDICATORS, The Conference Board U.S. Business Cycle Indicators, AUGUST 2006, http://www.econbrowser.com/archives/2006/09/can_it_be_that.html In addition to being a certain type of business cycle, a soft landing may also refer to a

market segment In marketing, market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as ''segments'') based on some type of shared charact ...

industry sector Industry classification or industry taxonomy is a type of economic taxonomy that classifies companies, organizations and traders into industrial groupings based on similar production processes, similar products, or similar behavior in financial ...

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"''.Business Report,

South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...

1 Feb 2007 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 An economic bubble (also called a speculative bubble or a financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, being the valuation that the underlying long-term fundamentals justify. Bubbles can be c ...

. This is enforced by definition, as any potential bubble followed by a soft landing would, in retrospect, not be deemed a bubble.

References

Business cycle {{business-term-stub

See also

References