I wish I could be confident that the array of U.S. policies already in place and those likely forthcoming will be helpful. But I think it more likely that the economy will eventually recover despite these policies, rather than because of them.Unfortunately, I am afraid I agree with him. I hope we are wrong and our recovery is more rapid, but it increasingly seems the structural adjustments the economy is progressing through are deeper than anticipated.
Wednesday, March 4, 2009
Probability of a 'Depression'
Robert Barro in a Wall Street Journal editorial provides some evidence to formulate the probability of a mild "depression" as defined as real GDP decline of over 10%. Based on his data, he estimates the probability at around 20%. The probability of a major depression (real GDP decline more than 25%) at around 9%. The last statement he makes deserves repeating here: