Yesterday, at the Peterson Institute for International Economics, Mike Mussa and I discussed – and debated – the likely shape of the US and global economic recovery. Mike has great experience and an outstanding track record as an economic forecaster. His view is that the entire post-war experience of the US indicates there will be a sharp rebound. Victor Zarnowitz apparently stressed to Mike, a long time ago, “deep recessions are almost always followed by steep recoveries.”
I completely accept the idea that a slow or L-shaped recovery for the US and at the global level would be something outside the realm of experience over the past 50 years. I would also suggest that the financial crisis in fall 2008, the speed of decline in the US, and the synchronicity of the slowndown around the world over the past 6 months has also surprised everyone (including most officials) who think that we are always destined to re-run some version of the post-1945 data. Continue reading “Is It a V?”