By divorced one like Bush
Via C & L via CR comes the NYT asking when will the recession be over. They have 11different responses. Roubini is there suggesting we could see an L curve.
We now face a 1 in 3 chance that, if appropriate policies are not put in place, this ugly U-shaped recession may turn into a more virulent L-shaped near-depression or stag-deflation (a deadly combination of economic stagnation and price deflation) like the one Japan experienced in the 1990s after its real estate and equity bubbles burst.
Calculated Risk highlighted STEPHEN S.ROACH (Chairman of Morgan Stanley Asia), A. MICHAEL SPENCE (Stanford Professor, Nobel prize, economics) and GEORGE COOPER (author of “The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy”). All three came up with 2010/2011. Although, they all noted “if’s” as to government action, including the world’s governments and maybe lingering effects.
I’ll go with the following.
Niall Ferguson is a professor at Harvard and the author of “The Ascent of Money: A Financial History of the World.”
This is a crisis of excessive debt, the end of the Age of Leverage. It will take longer than a few more months to resolve bank and household insolvency, especially with asset prices continuing to fall so rapidly. Even with zero interest rates and huge deficits, Japan suffered a “lost decade” in the 1990s — and that was when the rest of the world was doing well. This recession is taking place as the rest of the world is doing even worse than the United States. The collapse of trade as measured by East Asian export data is petrifying…At the moment, I find it quite easy to imagine two consecutive years of contraction. And I don’t rule out two more lean years after that.
Carmen M. Reinhart is a professor of economics at the University of Maryland.
Counting the months of decline, however, is a narrow gauge of distress. A better metric is the length of time it takes the economy to recover to the level of per capita income at its prior peak.
After the most severe banking crises around the world in the postwar period, the economy has taken an average of four years to return to its previous peak in personal income. After the Depression, it took the United States 10 years.
Wow? Someone basing the issue of the recession and it’s conclusion on how much income people have.
Do you think we can get her to consider the split of that income? After all, in that 10 year depression recovery the top 1% share declined from 22.35% to 16.68%. But (big but) in 1936 it popped up to 19.29%, then we had 1937. By 1939 (10 yrs) it was back to 16.18% and never saw anything close to it until 1986’s 15.92% (from 12.67the year before). We hit 22% in 2005!