The Politics of Debt

This is an update to a post published almost two years ago: Some Historical Perspective on the Current Recession.Back then I analyzed data until the third quarter of 2008. The data showed that we weren’t in a depression yet, and that Up to the 3rd quarter of 2008, the economic recession was shallower than the 2001 recession.

The revised data for the same period shows that in the 4th quarter of 2007 we were in a shallow depression that double dipped in the 2nd quarter of 2008 to bottom in the 4th quarter.

Make no mistakes, from the point of view of American corporations we hit a depression, a situation in which the undistributed corporate profits as percentage of GDP are negative which we had not seen since 1929.

Undistributed corporate profits as percentage of GDP

We exited the situation with a sharp V shaped recovery, and American corporations went into positive territory in the 2nd quarter of 2009 . There is a lot that still needs to be done, and in job front the recovery is not being reflected, that’s going to take time, and many types of jobs will not come back in the same numbers than before the depression.

In 2007, I wrote that we were in a recession, and the Republican pundits criticized my assertion based on the methodology of the analysis. Today, they will say that we are not in a recovery, and they will be wrong once again.

If you don’t care much about checking the previous posts, let me show you that the speed of this recovery blows away the recovery from the 2002 recession.

The stimulus packages have worked, they removed us from a depression on a steep v shaped recovery, the economy is coming back in full swing, and next year we will start seeing the effects on the areas were count: jobs and improved quality of life.

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Tags: America, GDP, Us