He makes the following observations:
- Not only are financial recessions deeper and slower in recovery than in normal recessions. They also have slower recovery the greater is the credit to GDP ratio.
- … a measure of credit based on loans outstanding, even including the role of the shadow banks, yields a conservative measure of our benchmark for where we should now be.
- We should have led the public to understand that we should measure success not by the level of the current unemployment rate, but by a benchmark that takes into account the financial vulnerability that had been set in the previous boom. We economists have not done a good job of explaining that our macro-stability policies have been effective.
- [The bailout expenditures] will probably be positive, and run to a few billion dollars. But they did literally stop a financial meltdown which was in progress.
- In sum, we economists did very badly in predicting the crisis. But the economic policies post-crisis have been close to what a good sensible economist-doctor would have ordered.
There is much more to the post, and it should be read in its entirety.
I think bullet point 3 merits additional stress. The magnitude of the calamity that unfolded in 2007 and 2008, and the difficulty in re-establishing growth, should have been placed in the context. In my view, that context includes the decade long (at least) buildup of distortions in the economy, from deregulation, non-regulation, and out-of-control fiscal policy. The challenge of educating the public remains, as attested to by the all too common refrain by some “that the recovery should have been stronger”, even while demanding austerity.