Three Years In

It's no secret that the last four years have been economically taxing for the United States, to say the least. Since 2007 there have been dramatic declines in production, housing, lending and so much more.

Many people still talk about the “current recession.” But what some of us non-economists can’t understand is that the recession actually ended in 2009. “The reason it doesn’t feel like it’s ended is because this recession came in the midst of a financial crisis,” said Dr. William Lastrapes, an economics professor in the Terry College of business at the University of Georgia.

Lastrapes, along with Dr. George Selgin, another professor in the economics department, talked to an audience of about 125 on Wednesday. His talk was “The Great Recession Three Years In,” on Wednesday at the Terry College of Business.  The event was sponsored by the University of Georgia’s Economics Society.

Lastrapes led the way giving many statistics about our recent economic status and also did a lot of comparing to the Great Depression. He stated that a major difference between the Great Depression and the recent Great Recession is that policy makers have not allowed the banking crisis to persist as they did in the Great Depression.

Something that has affected everyone in some way during the Great Recession has been the housing market. “The housing market is stuck and there’s probably not a lot to be said for it increasing anytime soon,” he explained.

One positive indication that Lastrapes brought up is that overall investment and employment have both begun to rise again.

Lastrapes concluded that while many people today are noting the similarities of the Great Depression and the Great Recession, it seems as though the recession is not nearly as detrimental and will not have as many lasting effects.

Selgin gave more insight into causes for the Great Recession and why it is taking so long to recover. He touched on three main causes: “misguided regulations, counter-productive monetary policy, and something called regime uncertainty.”

Regime uncertainty has had a particularly negative effect in recent years on both investment and unemployment.

“We could be talking about regime uncertainty being responsible for half of the excess or unnatural unemployment,” said Selgin. When people are uncertain about what is to come, they decrease their investment and production which causes the unemployment rate to spike.

Banks are now being paid more interest to build up their reserves, so logically they are decreasing their lending. While we have seen sales recover recently, credit and lending are still in poor conditions and Selgin said that this will continue to affect the employment situation unless we can once again increase investment lending. This banking policy is something that shows no sign of aiding investment.

During the question and answer portion of the event, the two professors faced multiple questions about their opinions on the current policy makers and in particular, the Chairman of The Federal Reserve, Ben Bernanke.

“I think Ben Bernanke’s job is an impossible job,” Selgin commented. Both professors agreed that the position is a hard spot to fill and it is virtually impossible to find someone who will make all the right decisions.

Selgin also responded to a question concerning the new trade agreements made by the United States. He said we should be somewhat worried because it is very possible it could have a negative impact on unemployment rates, but also pointed out that it will positively affect production.

Although many people may be looking for clear-cut answers about when things will take more of an up-swing, both Lastrapes and Selgin agreed that there is no single answer to our country’s continuing economic slump. But they believe that if the right decisions are made, we will begin to see positive changes.

 

Economists have their opinions and you have yours. Do you think the recession is over? On what do you base your opinion?