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Are We Still in The Great Recession?

The Government told us that the Great Recession ended
in 2009
, but why does it still feel like we’re in one? That’s because
we are actually still in a recession, silly! Well, according to economist
Richard
Koo
of Nomura Research Institute:

This kind of recession Koo is talking about is not a technical
recession. After all, the economy is technically growing — slowly,
imperceptibly, like the turning of the earth. But upon closer inspection,
we’re in a shadow recession he and other economists call a "balance
sheet recession." That means that just about everybody in the Western
World — households, corporations, and sometimes even governments —
is focused on paying off our balance sheets (i.e.: paying off debt)
at the same time. That’s nice for our balance sheets. But it’s a horrible
way to jumpstart a weak economy.

Koo does the yeoman’s work of drawing the picture of balance sheets
in the United States and some major European economies. The jagged lines
are a bit of an eyesore, but they tell a simple story. Between the IT
Bubble and the Housing Bubble that book-ended the 2000s, households
(in red), corporations (in blue) or both borrowed lots of money, year
after year. Then the recession hit, and our incomes fell, and we started
running surpluses by saving more of our money.

Derek Thompson of The Atlantic boils it down for us: Link
| Or read Richard’s full
paper
[PDF]

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Date
December 29th, 2011

Author
Stranger to the World

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