The U.S. Recession

Paul Gregory

Hoover Institution, Stanford

University of Houston

Issues

• Causes – housing bust and net worth

• Failure of regulation?

• Wall Street excesses?

GDP During Recessions

0

20

40

60

80

100

120

140

1 2 3 4 5 6

Great depression (29-36)

73-78 (oil shock)

81-88 Stagflation)

90-97 (Great Moderation)

2007-2012 (Obama)

Why Not a “Normal” Recession?

• Say financial crises take longer to resolve

• Never faced with such a dire situation before

• Changing institutions in lending market

• Massive Keynesian stimulus and debt

End of the Keynesian Consensus?

• Obama argument: Would have been worse

• John Taylor: failure for well known reasons