Saturday, December 5, 2009

Skyscrapers and Economic Busts

Economist Andrew Lawrence came up with the Skyscraper’s Index. Apparently, the buildings go up in bubble economies. Then, the bubbles explode…leaving the buildings standing. The owners and builders typically go broke in the aftermath. Note the last line of the chart.

Generally, the skyscraper project is announced and construction is begun during the late phase of the boom in the business cycle; when the economy is growing and unemployment is low. This is then followed by a sharp downturn in financial markets, economic recession or depression, and
significant increases in unemployment. The skyscraper is then completed during the early phase of the economic correction, unless that correction was revealed early enough to delay or scrap plans for construction.

No comments: