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Why is the recovery so darn slow?

Discussion in 'Off-Topic' started by Integral, Jun 9, 2011.

  1. Integral

    Integral Can't you hear it?

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    I have both serious responses (tm) and PM's to answer, but both of those can wait.

    The American (and Western more generally) experience, over the past 140-odd years, has been temporary recessions that are followed by recoveries that restore income levels to their long-run trend values.

    As evidence I provide the following graph of income per capita for several Western countries:


    For all of these countries, not even the Great Depression and WWII could budge them from trend. To the contrary: there has been convergence, so that those who were hit hardest by the Depression have bounced back to a greater, not lesser, extent.

    Now zoom in on the latter bit of the period, and focus on the US from 1984 to 2011 (I don't have the international data right now):

    Apparently, the recent recession could do what even the Great Depression could not: knock the US off of its long-term growth path.

    My questions is: why? And perhaps as importantly, is there anything policymakers can do to get income levels back on track? I'm not asking for a long-term increase in growth rates. I'm just asking for a year of strong growth to bring income/output back to trend.
     
  2. Camikaze

    Camikaze Administrator Administrator

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    Can the current trend actually be extrapolated, or is it still just part of the dip before a return to the same track?

    I guess it shouldn't be too surprising if the new trend in the large graph does continue, though, as compared to the recovery following the Great Depression and WWII, because there was greater motivation to really accelerate recovery after both of those events, particularly the second. I don't know how accurate this is, but I would've thought that whereas the economies during and after WWII had to completely transform, now it's just a return to the same-old. Perhaps there is more of a need for reinvention to get back on track.
     
  3. Perfection

    Perfection The Great Head.

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    Because it should be. The American economy was a large part BS based (baloney financial tricks) before the recession. The only way we could drastically improve is to start up the BS engine again, which will again force us into a recession when our economic bluff gets called.
     
  4. JohnRM

    JohnRM Don't make me destroy you

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    People lived beyond their means for many years based on credit and a value in their property that simply did not exist. Now, creditors have come calling, the value in their property has greatly diminished, and with the rolling back of people's lifestyles, jobs have disappeared, adding to the problem. New jobs that are being added are paying far less than those we lost.

    Simply put, the United States is going broke.
     
  5. AL_DA_GREAT

    AL_DA_GREAT amour absinthe révolution

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    This is a systemic crisis, not a regular financial crisis.
     
  6. Monsterzuma

    Monsterzuma the sly one

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    any chance it's because the growth trend holds on a global level and the US' share of global GDP got knocked down a few notches for the first time in recent history? i imagine the growth trend is subject to a good number of (quasi-) global influences such as technological advancement and resource extraction rate constraints.

    edit:
    i got one part right; US share of GDP has remained constant for the last few decades. there just isn't any sign of a fall since 2008 according to this resource:



    http://www.dailymarkets.com/economy/2009/11/19/us-share-of-world-gdp-remarkably-constant/
     
  7. Silurian

    Silurian Deity

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    If growth is below the trend line then the trend line will lower and things will look better.
     
  8. Monsterzuma

    Monsterzuma the sly one

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    one issue in the current US economic climate is that the country is facing something of a demographic crisis: the baby boomer generation is rounding it's spending peak.

    look into Harry Dent and Chris Martenson for more information on this.
     
  9. JerichoHill

    JerichoHill Bedrock of Knowledge

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    I would hesitate to view the short-term lack of adjustment to structural factors. This was not a demand-side recession.

    PS: The US is not going broke, it is not doomed, blah, blah, angst.
     
  10. Godwynn

    Godwynn March to the Sea

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    The recovery is so slow because that Obama keeps taxing and regulating the economy.
     
  11. Cutlass

    Cutlass The Man Who Wasn't There.

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    Int, I'm not sure I follow the OP logic. You say we are not going back to trend. But isn't it more true that we are not going back to trend yet? You say we went back to trend after the Great Depression. But isn't it true that we didn't get back on trend (and over for a while) pretty much until we were in WWII? We were off trend in the GD for a long time, pretty much for the same reasons we are off trend now. Damaged credit markets slow healing. So isn't the recovery likely to be similar? Some day the credit markets will be back to normal. Shouldn't we expect the economy to regain the trend then?
     
  12. Disgustipated

    Disgustipated Deity

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    don't be silly, he hasn't done so...yet.
     
  13. warpus

    warpus In pork I trust

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    You can't grow something forever.. at least not at the same rate.
     
  14. Cutlass

    Cutlass The Man Who Wasn't There.

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    Why not?
     
  15. Cheezy the Wiz

    Cheezy the Wiz Socialist In A Hurry

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  16. warpus

    warpus In pork I trust

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    We live in a finite world with finite resources. How could something continue to grow at the same pace forever?
     
  17. trader/warrior

    trader/warrior Deity

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    Going by the OP graph it looks like most countries took about 10 years to recover to the trend levels from the great depression.
     
  18. Disgustipated

    Disgustipated Deity

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    It took longer than that for the great depression. Yes we expanded in ww2, but I don't think the depression really ended until after the war. Then people began to spend all that money they accumulated.
     
  19. Shekwan

    Shekwan Kim Chi Quaffing Celt

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    We are constantly thinking of more efficient ways to consume the finite resources of the planet.

    I will concede that forever is impossible, but for the time being I don't see why not.
     
  20. Defiant47

    Defiant47 Peace Sentinel

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    No, we do not. The rising technology levels find new and more efficient ways (and alternatives) to resources we need. We can, in essence, say that our resources are infinite.
     

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