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This recession will probably be longer and be slower to recover than all the other recessions in the past 50 years. Despite widespread pessimism this is actually good news.
This recession is especially painful for two reasons: it related to a financial crisis and it is synchronised across many different countries.
The recovery of a financial crisis related recession is slower than the non-finance crisis variety. The output gain is only half that of the average recession once out of the trough. Recovery also takes 1.5 times longer to start.
The recovery of a synchronised recession (10 out of 21 advanced countries are currently suffering) is also weaker and slower than the average one.* An average recession lasts no more than 1 year while, on average, a synchronised recession lasts 1.5 years.**
So ... how is this "good" news?
Well, if we were in late 2007, the recession would be about to begin. But now it is the second quarter of 2009. We have gone through most of the recession. The recovery is going to begin.
Anyone joining the finance industry in the next several quarters will enjoy a gradually booming market. This will be a soft and long spring. The next winter is a very distant prospect indeed.
* www.imf.org/external/pubs/ft/weo/2009/01/index.htm
** There were only 3 globally synchronised recessions since 1960. None of them were associated with a financial crisis.
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