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(Image:
source.)
Like children
sitting anxiously in the back of the car on a long journey, many people --
especially those "experts" who failed to see financial Armageddon
coming or how bad it would be -- keep asking if we are there yet -- with
"there" being the long-awaited economic recovery.
Well, if
history is any guide, they might want to get their blankies
out, because odds are that we still have a long (and depressing) ride ahead
of us. According to a new paper, summarized by Globe
and Mail columnist Michael Babad in "Great Recession May Not Yet Be Even Half Over, Study Says,"
"the Great Recession may not even be half over yet."
"The
preponderance of evidence for episodes comparable with the current U.S. slump
is that, while potential GDP is eventually restored, the slumps last an
average of nine years," they write. "If this historical pattern
holds, the Great Recession that started in 2007:4 will not ultimately affect
potential GDP, but the Great Slump is not yet half over."
The U.S. is now
into its fourth year of the "Second Great Contraction," which began
in the fourth quarter of 2007 and is eclipsed only by the Depression, they
write. If it follows
the pattern they've established, it would end in the last quarter of 2016.
"How long
will the Great Slump last? Again restricting attention to the Great
Depression and the post-war slumps for advanced economies, the slumps lasted
from 7 ¼ years for Denmark, 7 ¾ years for Australia, 8 ½
years for Finland, 9 ½ years for Sweden, and 12 years for the U.S.
Whether you consider all five slumps or just consider the two slumps following
severe postwar financial crises in advanced economies (Finland and Sweden),
the average duration is nine years. While this is not an estimate, it can be
taken as a guide to the duration of the Great Slump."
Michael J. Panzner
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