Free exchange: Where did everyone go?

Posted: March 22, 2013 in economy
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Just when you thought it was safe…

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Free exchange

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Demography may explain the weakness of America’s recovery

MILTON FRIEDMAN once compared the business cycle to an elastic string stretched on a board. How far the string is plucked determines how much it springs back; similarly, the depth of a recession decides the strength of recovery. America’s recent experience has not been kind to the plucking model. Although the recession was the deepest since the second world war, the recovery has been a disappointment. In the three years since the end of the recession in mid-2009, growth averaged 2.2%, barely half the 4.2% average of the seven previous recoveries.
In part, this is because recoveries from financial crises face greater difficulties. Consumers are too much in debt; businesses cannot or will not spend; a damaged banking system stifles credit. But in its annual economic report, issued on March 15th, Barack Obama’s Council of Economic Advisers argues that this is not the whole story. The plucking model …

via Economic Crisis http://www.economist.com/news/finance-and-economics/21573969-demography-may-explain-weakness-americas-recovery-where-did-everyone-go?fsrc=rss

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