Same Point in the Business Cycle – How Much Help From the Fed Does the GW Economy Need?
GW’s supporters like to say that, when looked at from “the same point in the business cycle” the growth rate under GW stacks up favorably relative to the growth rate under Clinton. Its not true. And as my fellow Angry Bear PGL noted its also not true for employment.
This post takes a slightly different approach. I’ve noted several times that GW’s poor performance comes despite massive help from the Fed. How massive? Let’s look at the percentage change in the real Money Supply since the end of the last recession.
Monthly data (through October 2007) data on non-seasonally adjusted M2 can be found at the Fed’s site. (That’s the broadest measure of money for which the Fed still produces data.) Using monthly CPI-U data, we can adjust for inflation.
The table below looks at the percentage change in (non-seasonally adjusted) M2 since the end of the last recession. (Note… since Nov 2007 data is not available yet, I used October 2007 data.)
Notice… six years after the end of the first recession, real M2 is still below where it was during the recession. Anyone remember that being what the Fed should do to promote recovery? That’s not what any of the textbooks I ever saw said. In fact, it seems to be the opposite of what monetary policy looks when the Fed is trying to get the economy on its feet again. Its almost like Uncle Alan was doing his best to screw things up, isn’t it? And before you say “irrational exuberance” – in 1992? 1993? 1994? In fact, the series bottoms out in 1995… if there was a time that cutting back on the real money lever might have made sense, its at least a year or two beyond that point.
Contrast that with the pattern after the 2001 recession. GW got all the help a President could reasonable expect, and perhaps more. And still, here we are. Plus, the bill for some of that “perhaps more” looks about ready to come due.