Get Used To Lower Living Standards

Updated September 20, 2010, 08:03 PM

Yves Smith writes the blog Naked Capitalism. She is the head of Aurora Advisors, a management consulting firm, and the author of “Econned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.”

Most Americans probably find it hard to believe that statisticians have deemed the U.S. economy to be out of recession. Unemployment and underemployment are stubbornly stuck at the highest level since the Great Depression. Capacity utilization is under 75 percent, well below pre-crisis levels. There is still a large overhang of houses in foreclosure and serious delinquency, meaning that the housing market has yet to bottom.

Serious financial crises take a very long time to resolve, and the odds of a further bout of contraction are high.

The ugly fact is that serious financial crises take a very long time to resolve and result in a permanent fall in the standard of living. Past historical patterns confirm the slow job creation rate: it will be many years before the excesses of the credit bubble work their way through. That means the best we can hope for, absent aggressive government action, is an economy that bumps along at a low level of what is technically growth, but is very far from what most businessmen and consumers would consider healthy.
More at:

http://www.nytimes.com/roomfordebate/2010/09/20/is-this-what-a-recovery-feels-like/the-us-economy-will-continue-along-a-bumpy-road