Tuesday, June 10, 2008

Stiglitz on the Subprime Mortgage Crisis, Housing Bust, and Recession

From two months ago today: Joseph Stiglitz, winner of the 1979 John Bates Clark Medal and the 2001 Nobel Prize in Economics, discusses the state of the economy.

Keep in mind that even for the best economists, predicting the future of the economy is about as accurate as predicting the future of the weather—and for the very same reason. Both the economy and the weather are very complex systems with lots of independently moving parts.

While we may be facing the worst recession in the past quarter century—we've only had two recessions during that time and both were mild—I think it's very unlikely that this recession will be worse than the early 1980's recession.

At the beginning of the early 1980's recession, annual inflation was 10.3%. At the peak of the early 1980's recession, unemployment reached 10.8%. By comparison, today the inflation rate is only 3.9% and the unemployment rate is only 5.5%.

1 comment:

  1. you are comparing very different numbers and very different economies. The methodology for calculating both unemployment and inflation has been tweaked, resulting in significantly lower findings for both.

    In the 80's and even 90's, savings rates and home equity were higher. There were more manufacturing jobs and lower deficits.

    Why not compare this recession to a good recipe for bearnaise sauce? That would be as useful as the drivel you came up with.