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The Developing U.S. Recession and Guidelines for Policy

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Author Info
Wynne Godley, Alex Izurieta
Abstract

The United States should now be prepared for one of the deepest and most intractable recessions of the post-World War II period, with no natural process of recovery in prospect unless a large and complex reorientation of policy occurs both here and in the rest of the world. The grounds for reaching this somber conclusion are that very large structural imbalances, with unique characteristics, have been allowed to develop. These imbalances were always bound to unravel at some stage, and it now looks as though the unraveling is well under way. There may be no spontaneous recovery because the unraveling that has started is a reversion toward what, in the relevant sense, is a normal situation. This consideration leads us to take issue with some distinguished commentators, such as Alan Blinder (2001) and Laura Tyson (2001), who apparently assume that because a spontaneous recovery will occur relatively soon, any fiscal relaxation should be temporary. The general predicament is made worse by a deteriorating world economy; U.S. exports fell sharply in the first seven months of 2001, when the balance of payments was already heavily in deficit.

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Paper provided by Levy Economics Institute, The in its series Economics Strategic Analysis Archive with number 01-10.

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Date of creation: Oct 2001
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Handle: RePEc:lev:levysa:01-10

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  1. Wynne Godley, 1999. "Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World," Economics Strategic Analysis Archive 99-10, Levy Economics Institute, The. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Francis Cripps & Alex Izurieta & Terry McKinley, 2007. "Developing a Global Model for Trade, Finance and Income Distribution," Publications 1, International Policy Centre for Inclusive Growth. [Downloadable!]
  2. Alex Izurieta & Terry McKinley, 2006. "Addressing Global Imbalances: A Development-Oriented Policy Agenda," Working Papers 23, International Policy Centre for Inclusive Growth. [Downloadable!]
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