How The U.S. Avoided A Recession For A Decade

How The U.S. Avoided A Recession For A Decade

For the first time ever,
or at least since official tallying began,
the U.S. economy has started and
ended an entire decade without entering
a recession. That means this economic
expansion is now older than the i-Pad Instagram and
the Tesla Model S From the end of 2009 to
the end of 2019, the U.S. economy has added more
than 20 million jobs. We have launched an economic
boom, the likes of which we have
never seen before. It’s been the longest
economic expansion in the country’s history taking place
in a decade marked by the memory of the
Great Recession and by unprecedented access to
information about the state of the economy. Both consumers have been
more cautious and businesses have also become
more cautious, simply out of fear that
we might experience something similar to what we
saw 10 years ago. But just because it’s
the longest expansion doesn’t necessarily mean
it’s the strongest. Overall economic growth over
the past decade has been slower compared
to previous booms. And not everyone is
reaping the benefits. Today in America, you
got three people owning more wealth than the
bottom half of America. So how did the U.S.
get through this historic decade? And will it last? The simplest explanation for
how the U.S. economy has avoided a
recession during this decade is that it was
coming from a very low point at the end
of the last decade. As some economists
have put it: The deeper the hole, the
longer it takes to climb out. None of us
anticipated the full ramifications and extent
of the crisis. The economic picture from 2007
to 2009 was so gloomy it’s called
the Great Recession. Many experts define a
recession as two consecutive quarters of
negative GDP growth. GDP or gross domestic product
is one metric to gauge the overall health
of the economy. In the U.S., a
nonprofit organization called the National Bureau of Economic
Research, or NBER, decides if the economy
has entered a recession. The NBER takes into account
GDP and a wider range of measures like
income, employment, industrial production and
wholesale-retail sales. U.S. government agencies
like the Treasury Department and the Federal
Reserve go by the NBER’s definition of
a recession. The most recent recession,
according to NBER’s definition, was the
Great Recession. From 2007 to 2009. U.S. GDP fell 4.3 percent. The unemployment rate
doubled from 5 percent to 10 percent. And house prices and
stock markets crashed. People were hit essentially
both in terms of losing their jobs and a
lot of people were also hit very significant in
terms of losing their homes and home prices going
down and the stock market going down. The
only other time the economy was in
worse shape? During the Great Depression
in the 1930s. A stock market crash and
a series of banking panics put an end to
the economic boom of the Roaring 20s. Millions of
Americans lost their jobs and livelihoods as
the downturn lasted an entire decade. In the Great Depression
of the 1930s, unemployment peaked at
almost 25 percent. There were booms and busts
and every decade after World War Two. But one
notable thing started to happen. Economic expansions
lasted longer. The period from the
mid-1980s to 2007 became known as the
Great Moderation. Prices remain stable, and
while there were occasional dips on the
whole, the economy chugged along. One reason for this
is that officials at the Federal Reserve got
more effective at responding to changes in
the economy and because inflation was steady. Policymakers could act aggressively
when the next crisis came along. When the Great Recession
hit, policymakers in DC took unprecedented steps to
try to get the economy back on track. Their actions resulted in
trillions of dollars of economic stimulus. A very important reason
why the U.S. had had such a long
and very protracted expansion is that U.S. fiscal policy and monetary
policy, meaning the Federal Reserve and politicians,
were much more quick out of the box
in terms of supporting the economy. In 2008,
Congress authorized the Treasury Department to
invest hundreds of billions of dollars to
try to revitalize the country’s ailing financial and
auto sectors as part of the Troubled
Asset Relief Program, otherwise known as TARP. A year later in 2009,
President Obama signed the American Recovery and
Reinvestment Act. The law pumped hundreds
of billions of dollars into areas like infrastructure
and clean energy. The biggest stimulus effort
was underway in another part of Washington
at the Federal Reserve. By the end of
2008, the central bank had already lowered its key
interest rate to essentially zero. So it
undertook an unusual effort called quantitative
easing, or QE. David Wilcox worked at
the Federal Reserve Board during the crisis in the
Division of Research and Statistics. The Fed was able
to come in and purchase about 4 trillion
dollars worth of securities, drive up their
price and therefore bring down the interest
rate at which businesses were able to borrow. Households were able to
take out a mortgage. Do you think that that
those QE efforts helped the economy recover and get
to the point where it is today? There is no
question in my mind and there’s no question in
any of the academic literature that absent those
steps, you would have had an implosion of
the economy, the likes of which we hadn’t
seen since the 1930s. The Fed has kept
borrowing rates low throughout the decade, gradually raising them
at the end of 2015 through 2018 and
then quickly cutting again in 2019 to try to fend
off any instability in the economy. This past decade
has been characterized by very low interest
rates and generally fiscal stimulus. That means
lower taxes, higher government spending. In
December 2017, President Trump signed into law the
Tax Cuts and Jobs Act, which slashed corporate tax
rates for American companies. The effect was a
boost to GDP at the start of 2018. Regulation rollbacks by
the Trump administration have also cut down
some costs for businesses. There’s no denying the
American economy is in better shape at the end
of this decade than the last. As of December 2019,
it expanded for a record 126 straight months
while the unemployment rate was near its lowest
level in 50 years. Even though the last 10
years brought the longest expansion ever in the US,
it hasn’t exactly been an economic boom
by historical standards. Many Americans still feel
left behind and this decade has been marked as
much by the growing economy as
increasing inequality. There are pockets of
the country and important groups of individuals,
communities, families, households who still are
not enjoying anything that they would describe
as economic prosperity. GDP growth during this
recovery has been slower than in previous
economic expansions. Some investors point to
mini recessions over the past 10 years where GDP
growth has just barely exceeded 0 percent. We’ve had a number of
mini cycles within this expansion, but generally speaking,
if you look at GDP over the last 10 years,
it has really, and it looks just amazing, been 2
percent for a very, very long time. So it
has been relatively flat. The memory of the
financial crisis has made consumers and businesses
more cautious about spending money and more
attuned to the next recession. Unlike in
previous decades, the Internet has given consumers
access to the latest news and economic
indicators, potentially making them hyper aware of any
changes in the economy. I think because there was
so many things that we all missed in the
financial crisis, both before and when he was going on. In terms of the speed of
the slowdown, I do think that both the press and
consumers and the Federal Reserve and us in
financial markets are basically much more alert to
what’s going on. That caution has meant
there aren’t imbalances in the financial system which
has helped the recovery go on
for longer. Typically, expansions end
because they overheat. What I mean by that
is the economy is rip- roaring, booming. You know, you see
a lot of construction, overbuilding. You see a
lot of borrowing, high leverage. You see a
lot of speculation in markets. But in this
expansion, we never really got going. We don’t
have that overbuilding problem. We don’t have
over-leverage in general. But some of the
steps policymakers took during the crisis have only
made inequality worse. One glaring blemish is the
gap between the haves and the have nots. Look
no further than the stock market. U.S. markets are
near record highs, but many Americans have missed out
on the bull run. By one estimate, the
wealthiest 10 percent of Americans own more than 80
percent of the stock market’s wealth. As the
stock market rises, you know that this benefits that
the top 20 percent and really the top 10
percent and really the top 1 percent and really the
top one tenth of 1 percent. So the wealth
distribution is gotten much more skewed. The
other thing that’s happened is homeownership rates
have declined. Homeownership was key to
the wealth of middle-income Americans. That obviously got creamed
in the financial crisis and the
housing bust. And so homeownership rate
today is meaningfully lower than it was when
it peaked ten, fifteen years ago. And that
means that middle-income Americans just haven’t been
able to build wealth. Economists like to say
expansions don’t die of old age, meaning there’s no
time limit for how long a period of
growth can happen. But there are still warning
signals that could be pointing to the
next recession. Record low interest rates
have fueled record high debt levels. Some economists
and investors fear U.S. public debt, which
totals more than 23 trillion dollars, is the
next ticking time bomb. That debt is only set to
go up in the next decades as America’s
population gets older. And if interest rates go
up, it will be even harder for the government
to pay off. A lot of discussions
whether the expansion can continue or not is all
about: Are we vulnerable in the expansion because of
student debt being so high? Are we vulnerable
in the expansion because of corporate debt
being so high? Political and trade uncertainty
are also creating unease about the future health
of the economy as the U.S. enters
a new decade. The trade war that could
really screw things up. Businesses are very
nervous, particularly larger business with
multinational operations. Others look to technical
indicators like the yield curve, which has
been flashing recession signals. We know there will
be a next recession. We just don’t know
when it will be. We don’t know whether it
will be six months from now, a year from now
or three years from now. We haven’t seen the
last economic recession in U.S. history. But maybe as
the chairman of the Fed has said, there can’t
be a bust when there hasn’t been a boom
in the first place. What we’ve seen is three
of the four longest business cycles in U.S. recorded history have
been quite recent. So we’re seeing that. And
if you look at today’s, look at today’s economy,
there’s nothing that’s really booming that would
that would want to bust, in other words.
It’s a pretty sustainable picture.

Posts created 10199

100 thoughts on “How The U.S. Avoided A Recession For A Decade

  1. Yeah right. There has not been a boom. are you kidding me. The market is at an all
    Time high. Unemployment at 3.5%. This is a boom.

  2. We've been in an inflationary depression since '08, but papered over by the Fed. They can't allow another recession to happen or it'll collapse the economy. Eventually the inflation will overwhelm the economy leading to global fiat collapse, that's coming shortly.

  3. by suppressing other countries currency value and inflating our own so our assets seems to be worth more and foreign investor pump money into our economy to create demand and drove prices up. It's simple really.

  4. All Americans should know the prosperity you country has had in the last ten yrs (and the entire word for that matter) is based on practices that are 1000x worse than wht led to the previous collapse, be ready. There isn’t a person i despise more than Ben Bernanke. Well except his masters who directed himand who are orchestrating a “rebalancing” of economic policiy like we’ve never seen before.

  5. Hate to burst your bubble, but the new decade doesn't begin until January 1, 2021. When you count you start from 1, not 0. So there's still time.

  6. The economic expansion has only been going on for about 3.7 years. That's not a decade these news people are so fake newsy💜💛💜

  7. Australia: A decade? That’s cute, come talk to us when it’s been a generation without a recession and you’re the only country in the OECD to not have a recession during the GFC.

  8. Thus all of such analyst that are advertising a middle point, just take a look before previous recession what was? either way Silicon Valley went to the sky with all of venture capitals coming from financial system that collapsed back in 2008. Then that what happened on CDO's and all of MBS's could be placed there in all of such unprofitable tech startups/companies that are in such models as non profit.

  9. All time high stock market, but also all time high earnings. It's not a particularly overpriced stock market.. just a little. Some other commenters have said it: The debt will be top thing to watch… look for how well borrowers are servicing those debts

  10. The 401K is just like rolling the dice. Maybe you can retire or maybe you crap out and have to work until you die. What a deal!😂💸💸💸💸💸💸💸💸💸💸💸🎲🎲🎲🎲🎲🎲🎲🎲🎲🎲🎲🎰🎰🎰🎰🎰🎰🎰🎰🎰🎰🎰

  11. Wealth distribution is a false concept. That's talking about money as if it's one fixed pie and that if one group has more and more well then all others must have less. This is not how it works. One group can get richer without having any effect on the other groups. (really just many individuals) Wealth distribution is just a socialist talking point.

  12. How do you reduce unemployment numbers? Simple. Stop counting the unemployed. No longer eligible for unemployment benefits because you've been out of work for too long? Well, then you must have a job, then, even if there's no record of it. That's how the government figures it.

  13. The usual effort called QE is giving the banks & corporations trillions to buy back their stocks and raise real estate.

  14. Comments are full of resentful idiots who understand nothing about the way the world works and even less about economics. They went to youtube college and majored in blaming others for their bad decisions.

  15. 😂😂You guys, along with the entire MSM, have no clue. If you forecast a recession long enough, eventually one will happen to come. Stop pretending you know the future. I'm sure you wish one would come so you could blame Trump for something negative. Your credibility is shot, look in the mirror and try to gain a shred of self-awareness.

  16. B.S. All eight years Obama was president there was a recession. All those rosy numbers were made up. Trust Trump, he never lies. He’s the greatest president in American history. Why? Because he said so.

  17. The federal government ended the 2019 fiscal year with the biggest deficit — $984.4 billion — we've seen in seven years. The widening gap comes as a result of continued spending increases and dwindling receipts. The deficit marks the largest October shortfall since 2015. Income also dropped by 2.8% last month from a year earlier. Americans are winning the war for the 1% billionaires.

  18. prolonged by massive corporate tax cuts, meaning companies made close to a trillion dollars for doing absolutely nothing.

  19. People have been borrowing money and using credit card 💳 more than ever before its matter of time and the smoking mirrors that the Feds have been using pumping money 400 billion in one month and millions of Americans don’t even have a $1,000 in savings account

  20. Remember when Jim Cramer and cable news were bullish on the eve of the Great Recession?

  21. Thank you Obama for this nice economy and many months of economic growth. Thank you Trump for not nose diving it into the ground.

  22. How obama cleaned up Bush's mess and created a long term plan. Honestly all Republican terms are like kids making a mess that a democrat has to clean up

  23. From New Zealand to the USA I say CLOSE THE FED down, and put them on TRIAL for their money printing SCAM that they have propagated! Steven Terner Mnuchin on fox was asked by Lou Dobbs how 1.5 Trillion USD Cash Has Disappeared, and got the answer many banks have USD stored there. ok, um right. So were meant to trust the banks with that answer?

  24. All they did was push it to a later date and then they bought more stonks and continued to pamp it, pamp it, pamp it like a 1980s work out video.

  25. through instigating wars, manufacturing and selling weapons… first us will blame countries like iraq for wmd's and then attack them after they find nothing and its all mess caused by them selling them weapons capturing their natural resources. Iraq, Libya, Syria and lets say Afghanistan are just few examples

  26. Not a bad overview piece, but i think the only insight was about access to information as a means more informed decision making at every level.

  27. Luego le atacan pero la verdad es que Trump ha conseguido mejorar la economía y la bolsa…ánimo Trump cría cuervos y….

  28. Answer the question : by creating paper money . Don't need to be a " specialist" or an " economist " . How much time did we lose with them ??? And who are paying them ? Those ropes need to be strong !

  29. The good times are going to come to an end. The federal government has been taking out a giant loan that will come due and we won't be able to pay it off.

  30. Fracking and OIL. Energy independence. The dollar is based on oil. There is just more oil so it explains it. Trump is in line with these developments representing an inward-turning America that spends more on itself and less on foreign wars … as oil is plentiful at home, these wars are no longer necessary. We had 3 years with no new American wars. Will it last? Well … the oil seems to be plentiful.

  31. I can't believe it's 2019 in the information age and they're still people who are attributing positive economic growth 2 the master Pander mr. Donald Trump

  32. We didn't go an entire decade without a recession. Just misreporting statistics. If you look at producing goods, employment and capital investment from 2014 to 2016, I think it's clear that we were not in a healthy economy. Its just in other sectors it hid these effects which would have been more evident in 2017 if Trump didn't reverse course. I'm sure if you were unemployed in West Virginia or New Mexico, it doesn't matter how well some New York Stock Investor is doing.

  33. LOL, we've been stuck in a recession ever since obama got a hold of things, they've just hidden it. The money is worthless, stocks are through the ceiling with no corporate earnings….it's all a shell game.
    "much more quick out of the box in terms of addressing problems in the economy" LOL LOL LOL LOL……. you mean they fired up the printing presses and injected more fake fiat currency via the magic of "QE".
    They really are justified in thinking we are all a bunch of morons.

  34. historical low rate + $4.1 Trillion dollar balance sheet. is gdp growing, yes it is. is debt growing, yes it is. is gdp growing faster than debt, no it's not. meaning we get less than $1 in gdp with every dollar printed. now when recession hits, wealth disappears but debt doesn't shrink on its own. weird thing is debt grows as we enter into a slowdown, but somehow we can't shrink debt after 12 year of expansion… LMAO, math anyone?

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts

Begin typing your search term above and press enter to search. Press ESC to cancel.

Back To Top