Saturday, November 16, 2013

How fast has been the recent recovery? Faster than the Depression

But that is not really saying much in favor of the current crisis. Krugman has recently shown how bad the European crisis is comparing the index of industrial output in the Great Depression and the Great Recession. The same exercise for the US is shown below.
Note that the recovery was faster this time around (21against 43 months, incidentally both associated to changes in fiscal policy, in early 1933 and mid-2009 respectively). Further, due to the more active fiscal and monetary policy (besides specific policies like the rescue of the Big 3 auto makers) now we are at the same level than in late 2007, while back then 72 months into the recession industrial output remained some 25% below its previous peak.

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