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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Minsky Conference Slides with Notes


At the 24th Annual Hyman P. Minsky Conference, ECRI's Lakshman Achuthan presented "The 'Subpar' Recovery: a Longstanding Misunderstanding," covering the following points:

1. The weak pace of recovery from the Great Recession was in line with historical patterns. The business cycle owed us nothing more. 

2. Despite massive global QE, the long-term decline in trend nominal GDP (NGDP) growth is truly global. In the U.S., annual trend NGDP growth is three and three-quarters of a percent, well below the five percent commonly presumed. This is because:

   a. Productivity growth has averaged half a percent a year for the past four years
   b. Potential labor force growth has averaged half a percent a year for the past four years, and will remain there for the next decade, according to the CBO
   c. Since productivity and labor force growth add up to about one percent, even if the Fed's 2% inflation target is met, nominal GDP growth is still likely to trend down towards 3%

3. So, trend growth has stayed low. But the Great Moderation from 1985-2007, after a major spike in economic cycle volatility, gave way to the Greater Moderation, primarily because oil price price volatilty plunged to its lowest readings since oil prices were fixed, four decades ago.

Click here for a PDF file of the presentation slides with notes. The audio available below accompanies the slides.

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