A trillion dollars lost

GDP, 1983 to 2013, augmented to include trend

The chart above shows US Gross Domestic Product for the period 1973 to 2013 (GDP, thick black line), with recessions indicated by vertical gray bars. For each period of economic expansion I’ve added a flat trend line, essentially identifying the level of US GDP as if the recession had never happened. You’ll notice that with the exception of the most recent (rightmost) recession, GDP quickly recovers.

But its a curious thing about The Great Recession, which ended in June, 2009 – almost four years later, US GDP is way off track. In fact, US GDP is roughly $1T lower than it should be, if GDP has recovered as quickly as it had during previous recessions.

What’s the difference? We have never intervened in the financial markets like we’re doing now. We have never run such large deficits like we’re doing now. With each round of stimulus The United States is not only running out of financial rope, the increase in GDP is weaker than the one before.

Sure, the stock market is booming, but not the economy. Does stimulus really work?

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