Gazing at yonder Calculated Risk chart, it’s striking that the current recession, though much more severe than the previous two, has basically the same “u-shape” as the 1990 and 2001 recessions:
If you talk to folks in and around the central banking game, what they tend to tell you is that this reflects the fact that something has changed about the world. It used to be that recessions had sharp v-shaped recoveries, but now they have lagging u-shaped recoveries. At the same time, if you talk to folks in and around the central banking game about the fact that during this same period we never have the kind of inflation-acceleration episodes that we used to have then they attribute this to better central banking policy. It used to be that sometimes inflation would spike a lot, and it used to be the case that recoveries from recessions were very rapid. Not inflation never spikes, but recoveries from recessions are slow. The good news part of that equation is because of better policymaking, but the bad news part of that equation is a broad structural shift in the nature of the global economy.
It’s a convenient theory. Is it a persuasive one? I don’t think so.