Study Finds the Great Recession is Still in Effect

The Roosevelt Institute has released a report which argues that the Great Recession left us with a new low GDP that appears to be permanent.

Per common knowledge, the recession of 2008 was brought to us largely by the widespread prevalence of what was called sub-prime lending. This is a lending policy where mortgage companies extend loan offers to everyone who walks into their offices regardless of whether or not the person can ever repay the loan.

A number of people in large Real Estate and lending firms reported that the call to make these sub-prime loans came from above- that they were told the time was right to make these deals. In the end, major financial institutions ended up in possession of properties that they wouldn’t otherwise own. Millions of people lost their homes, jobs, families and more over what was called the breaking of the bubble.

It has been well documented that the so called “housing bubble” was not a natural uptick in real estate values, but a narrative used to push lenders into a massive lending spree which- the big banks bet- would result in massive amounts of loan defaults. The banks would become the owners of billions of acres of forfeit properties, and a recession coupled with a housing bubble on top of a financial crisis would provide ample cover for the financial institutions who would, (and did), walk away with the spoils.

The report examines the common view that the post recovery economy is functioning normally, and close to its full potential. It makes five primary arguments;

  1. The GDP has not re-attained previous normal levels.
  2. The drop in employment over the last 8 years is not due to demographics- but to low productivity.
  3. The sluggish growth of productivity can be explained as the result of low demand, this includes investment markets.
  4. The current state of the economy does not match the explanation which predicts an ongoing expected recovery.
  5. The combination of weak output, low wage growth, low inflation, and low-interest rates may be in part the result of the demand shock but doesn’t jibe with the drop in supply.

In a panel discussion hosted by the American Enterprise Institute in November of last year, it was noted that after practically every other major recession in history the norm is that productivity temporarily soars and returns to normal, or better, within three to five years.

This pattern holds true nearly without exception, and it’s easy to understand why. During a period of fear and uncertainty, people become both more productive and more conservative in terms of spending. This causes an economy to break the surface dramatically like a whale breaching water. After the 2008 recession, there was never any such breach. There has been only stagnation followed by numerous explanations that don’t match reality.

The report concludes, “Output remains a full 15% below the pre-2007 trend line, a gap that is growing wider, not narrower, over time. Under current conditions, higher inflation and a rising wage share are arguably desirable; or at least should be considered much less costly than the stagnant incomes, underemployment, and waste of productive resources that will result from underestimating potential output.”

The report calls for action that at present, is far from being on the table. In essence, the report claims that the sluggish recovery we have heard so much about is at best an illusion- at worst, a deception. But at present, Americans, and major institutions and decision makers are acting as if the economy is recovering- when it is not. The inevitable result of this can only be another deeper recession- something that prognosticators have been speaking about since at least 2014.

The striking character of current output trends departs from historical trends. This fact is highlighted by pre-crisis economic models used to forecast growth having led to dramatically inaccurate predictions. Despite this, behavior has not changed. We are, steering toward the iceberg.

After the crash, Obama declared the banks too big to fail and while other countries jailed their bankers, we bailed them out. Today, we cling to the hope of a complete financial recovery that isn’t coming. In the meantime, many Americans have had to tighten their belts, re-brand their professional lives and continue to hope that the sluggish recovery will eventually come up for air.

But the facts tell a starker story. The US economy was fleeced in the previous decade and what was lost isn’t going to be recovered without a fight.

~ American Liberty Report