FED: 2007-2009 Recession Cost Each American $7,300 in Foregone Consumption
- Posted on July 11, 2011 at 8:48pm by
Christopher Santarelli
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The Federal Reserve Bank of San Francisco has released a report quantifying what the Great Recession has cost Americans over the last few years:
“The Great Recession of 2007-2009, coming on the heels of a spending binge fueled by a housing bubble, so far has resulted in over $7,300 in foregone consumption per person, or about $175 per person per month. The recession has had many costs, including negative impacts on labor and housing markets, and lost government tax revenues. The extensive harm of this episode raises the question of whether policymakers could have done more to avoid the crisis.”
The report was written by senior economist Kevin Lansing reflecting on the period from December 2007 to May 2011, and the $7,300 per person number was calculated by comparing the inflation-adjusted path of consumer purchases to pre-crisis levels.
In a Bloomberg Businessweek interview Lansing states that the purpose of the paper was to give an idea of how much stimulus was coming from the housing bubble. Lansing:
“People are wondering why consumer spending is so slow these days. What they should be asking is: Why was it so strong in previous years? You’re comparing it to an artificial economy that was driven by debt.”
Lansing states that using interest-rate policy rather than regulatory actions “may have a distinct advantage” in bursting asset bubbles to avert a repeat financial crisis.
“Many have argued that a central bank’s interest rate policy is too blunt an instrument and that regulatory policy is better suited to restraining bubbles. However, regulatory policy may not be a magic bullet. Unfortunately, regulations put in place after a crisis to prevent bubbles are often relaxed as complacency sets in, opening the way for the next bubble (see Gerding 2006). Interest rate policy may have a distinct advantage because vigilant central bankers can deploy it against bubbles regardless of the regulatory environment.”
Lansing’s report also compares the prolonged severity of the current recession to past crisis:
“Figure 1 compares the trajectory of monthly real personal consumption expenditures per person during the Great Recession with the corresponding trajectories for the two prior recessions of 2001 and 1990–91. The 1990–91 recession was triggered by the combination of an oil price shock and a credit crunch (see Walsh 1993). It took 23 months for consumption per person to return to its pre-recession peak. In contrast, as of May 2011, 42 months have elapsed since the start of the Great Recession and consumption per person is still 1.6% below its pre-recession peak.”
Lansing points to declines in household net worth, increases in savings, reduction in lending that fueled past spending and slowed population growth to be the causes for this recession’s drop in consumption.
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cowdude
Posted on July 13, 2011 at 7:38amForget the lost spending. I am more upset about the additional expense added to the tax bill’s of individual created by the federal slush fund used to purchase the dependent class vote.
Cowdude
Report Post »http://conservativewatercooler.com
HorseCrazy
Posted on July 12, 2011 at 7:18pm$7300 less spent? This figure upsets me. These folks have no idea what some of us have lost while they focus on their “loss” of my money being spent. sickening
Report Post »W@nd@
Posted on July 12, 2011 at 4:41pmit really started with the control of Congress by the dembots in 2006 they sabotaged this country right and left that is where you start to calculate…
Report Post »dembots run everything into the ground and
never ever own what they have done….
they always play the blame game or
take credit for what the repubs have done to correct things
this party is worthless
i will NEVER vote for another one and
i am eyeballing the repubs
to be progressive free before i vote for any of them…
i like many others are soooo done with them their mess and their lies to cover their own @$$$e$
Robert999
Posted on July 12, 2011 at 2:08pmThe Recession began in January 2009 when Obama was sworn in as President. Just like how the Great Depression began when FD Roosevelt became President.
Report Post »adastra2005
Posted on July 12, 2011 at 12:33pmMisleading by using population average. How about a similar study that seperates government sector from private sector. Those working for government likely lost nothing while those in the private sector lost more than this $7,300. Federal government workers probably got an increase.
Report Post »cntrlfrk
Posted on July 12, 2011 at 11:37amThe wording of this sounds like democrat economic verbiage.
So, the “Great Recession” caused the average American to consume less which “Cost Each American $7,300 in Foregone Consumption”
huh?
So the average American spent less, and saved more, and this is bad?
The Average American is just like the Average Business Owner. Until Obama stops attacking them from all fronts, they are keeping their cash close and waiting for the beating to stop.
.
Report Post »republic2011
Posted on July 12, 2011 at 11:32amPolicy Makers can do a lot by getting out of the way. Play more golf.. you are less dangerous when you are not in the halls of Congress.
Report Post »republic2011
Posted on July 12, 2011 at 11:31amPolicy makers could have done a lot more… yes… Get out of the way!!! Go play golf and stay out of the free market. There… all fixed.
Report Post »NOBALONEY
Posted on July 12, 2011 at 4:28amThe Great Recession? This report by the Federal Reserve Bank in San Francisco written by a bureaucrat tries to explain why interest rate control is better than regulationary control when it comes to bubbles. Of course he never includes the Quanntative Easings that haver taken place, and his chart ends at 2009. I imagine that this reportt cost the taxpayers plenty, and only shows that we need to reduce the size of the Federal Government, and revamp the Federal Reserve.
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