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Financial Recessions Don't Lead to Weak Recoveries (The Obama years are the exception)
Wall Street Journal ^ | 09/28/2012 | Michael Bordo

Posted on 09/28/2012 9:23:00 AM PDT by SeekAndFind

There's a belief among policy makers that serious recessions associated with financial crises are necessarily followed by slow recoveries—like the one we've experienced since mid-2009. But this widespread belief is mistaken. To the contrary, U.S. business cycles going back more than a century show that deep recessions accompanied by financial crises are almost always followed by rapid recoveries.

The mistaken view comes largely from the 2009 book "This Time Is Different," by economists Carmen Reinhart and Kenneth Rogoff, and other studies based on the experience of several countries in recent decades. The problem with these studies is that they lump together countries with diverse institutions, financial structures and economic policies. They also conflate two different measures of speed—how long it takes a country to get back to its previous business-cycle peak, and how fast the economy grows once the recovery has started.

Milton Friedman had a different way of looking at recoveries from cyclical downturns: the "plucking" model. Friedman imagined the U.S. economy as a string attached to an upward sloping board, with the board representing the underlying long-run growth rate. A recession, in this view, was a downward pluck on the string; the recovery was when the string snapped back. The greater the pluck, the faster the bounce back to trend.


Thus the slow recovery that we are experiencing from the recession that ended in July 2009 is an exception to the historical pattern. This can largely be attributed to the unprecedented housing bust, a proximate measure of which is the collapse of residential investment, which still is far below its historic pattern during recoveries. Another problem may be uncertainty over changes in fiscal and regulatory policy, or over structural change in the economy.

(Excerpt) Read more at ...

TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: recession; recovery

1 posted on 09/28/2012 9:23:09 AM PDT by SeekAndFind
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To: SeekAndFind

Know than any hint of a recovery was due to the American people and not Obama. We worked, invested, invented, produced, created, saved, lent, borrowed. We drive the economy. Anything and everything Obama did and is doing is hindering recovery. It’s not just O. All the government can do is hinder or get out of the way.

2 posted on 09/28/2012 9:53:31 AM PDT by all the best (`~!)
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To: SeekAndFind

Our current financial woes aren’t the fallout of a cyclic financial downturn or unavoidable recession.

What we are going through is the fallout of Obama’s intentional “Restructuring of America”.

He didn’t hide his intent to destroy the country and redistribute the loot.
In fact, he campaigned on promises to do just that.

And wealthy stupid fools stumbled all over themselves to throw piles of cash at his campaign.
And other stupid fools tripped over each other to get into the polls to vote for him.

Now he is giving them what they wanted.

3 posted on 09/28/2012 11:12:49 AM PDT by Iron Munro (US Embassies Come and Go But An Obama Apology Lasts Forever)
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To: Iron Munro
Very good analysis! You hit the nail right on the head!
4 posted on 09/28/2012 2:54:36 PM PDT by Patsygirl
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