Even judged against the recoveries of the worst financial crises, the current
The risk to the
outlook is not that it will repeat the precedent in “After the Fall” of a deep recession and hesitant recovery. That has already happened. Rather, the risk is that the foundation for sustained expansion after that pain has not been set. Figure 3b [below] identifies the key drivers of economic expansion in the fifteen episodes we studied. As plotted by the solid blue line, real equity prices rebound sharply in the median performance. House prices (the dashed green line) continue to sag in real terms, but their rate of decline slows. Four years after the fall (which is five years after the asset market peak), capital gains on equities are driving wealth creation. US
But this is not so, yet, in the
. The table [below] tracks the median performance of the fifteen crisis countries and the United States five years after the asset market peak. In the median case, a country has recovered its previous peak in production, with real GDP per capita up 3.7 percent, on net. The United States recovery is yet incomplete, with real per-capita output 2.2 percent off its 2006 level. The two rows below give the associated asset market performance, showing that the real values of equities and homes track well below the median experience. US
See “Is the U.S. Economy Freefalling?” by Vincent Reinhart, American Enterprise Institute.