Sunday, March 1, 2009

When will it end?

NYT reviews experts opinions on when the ongoing economic downturn will end.

1. With both the housing and the credit bubbles having burst, their stock portfolios down and their jobs threatened, consumers have been shocked into a new frugality. They are likely to be restrained for years to come... it looks to me as if this recession won’t end until late 2010 or early 2011.

Stephen Roach

2. If governments are quick and clear in their intentions and intervene in a coordinated way in both the real economy and the financial sector, we will probably have an unusually long and deep global recession through 2010. If they don’t, it is likely to be worse than that.

Micheal Spence

3. We are now in something more like a Great Recession... This is a crisis of excessive debt, the end of the Age of Leverage... At the moment, I find it quite easy to imagine two consecutive years of contraction. And I don’t rule out two more lean years after that.

Niall Ferguson

4. Nobody knows when this recession will end. Economic forecasting is a dark art, and predicting when recessions begin and end is its weakest link. That said, my best guess is that growth will return in the fourth quarter of this year.

Alan Blinder

5. Will last at least until the end of the year — 24 months, the longest since the Great Depression. Even if the gross domestic product grows in 2010, it is likely to be no higher than 1 percent. And at that rate, with the unemployment rate rising toward 10 percent, we will still be substantially in a recession... Even if appropriate aggressive policy actions were undertaken... the growth rate would not rise closer to 2 percent until 2011. So this recession may last 36 months.

We now face a 1 in 3 chance that, if appropriate policies are not put in place, this ugly U-shaped recession may turn into a more virulent L-shaped near-depression or stag-deflation (a deadly combination of economic stagnation and price deflation) like the one Japan experienced in the 1990s after its real estate and equity bubbles burst.

Nouriel Roubini

6. Counting the months of decline, however, is a narrow gauge of distress. A better metric is the length of time it takes the economy to recover to the level of per capita income at its prior peak... After the most severe banking crises around the world in the postwar period, the economy has taken an average of four years to return to its previous peak in personal income. After the Depression, it took the United States 10 years... the period during which the economy will remain below its earlier high-water mark will be protracted

Carmen Reinhart

7. If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability — and only if that is the case, in my view — there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.

Ben Bernanke

(HT: NYT)

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