The next downturn could rival the Great Depression and wipe $10 trillion off US household assets
The but being, US household assets are about $100 trillion. A 10% decline is rather less scary really. Further, $10 trillion is about how much they’ve gone up in value in 18 months or so (about $2 trillion a quarter recently).
Such a decline ain’t nice but…..
The world’s major economies are skating on dangerously thin ice and lack the fiscal, monetary, and emergency tools to fight the next downturn.
A roster of top crisis veterans fear an even more intractable slump than the Lehman recession when the current ageing expansion rolls over. The implications for liberal democracy are sobering.
“We have no ability to turn the economy around,” said Martin Feldstein, President of the US National Bureau of Economic Research.
“When the next recession comes, it is going to be deeper and last longer than in the past. We don’t have any strategy to deal with it,” he told The Daily Telegraph.
Well, according to the best research (Milton Friedman) what caused the Depression was bad government policy. So, as long as we don’t repeat FDR’s mistakes we’ll not have another one. Sure, we might not have the stuff to fight the next recession but that’s a different matter, that being why we call one thing a recession, the other a depression.
Oh, and yes, a $10 trillion hit to household assets would cause a recession, the wealth effect would take care of that.But then the business cycle will always be with us.