Archive for July 22nd, 2012

It is now more than four years since the beginning of the financial crisis. And ever since economists have discussed whether we will face an L-shaped, a U-shaped, a V-shaped, or a W-shaped recession. If you don’t know what that means, there is a simple explanation on Wikipedia.

Let aside theory, what counts is actual experience. And unfortunately, as Greg Mankiw pointed out the data support the L-shaped story:

Employment population ratio

To some extent this development is similar to the 1930s. Despite (or because) of massive government intervention job growth in the private sector has been very slow. This view is supported by two videos: the first from an interview with Dr. Thomas Sowell, and the second from ReasonTV:

Once you start to intervene, it is not just the question of the merit of the particular intervention, it is the fact that nobody knows when you are going to intervene again.

Unemployment stood at 17 percent in 1939, a decade after the stock market crash.

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