The attached article is perhaps the most informative I’ve read regarding our economy and what we can learn from other financial crises our country has faced in the past. It was written by Carmen Reinhart, a professor of economics at the University of Maryland and Kenneth Rogoff, a professor of economics at Harvard and former chief economist at the International Monetary Fund.
Below are a few of the highlights:
·Negative growth episodes, like we are experiencing, typically last just 2 years. This should end by September 2010 if history repeats itself.
·Housing typically falls 36% which means we may have another 8 -10% to go from current levels.
·Equity prices historically fall 55% in roughly 3 ½ years and could take another 2 years to have a sustainable rebound.
·Unemployment is likely to worsen for another 2 years and could mean double digits are reached.
The article goes into much more details than my summary above and is worth reading in full.
When asked about your view of the economy, this is a good article to send as a thoughtful and historical review comparing past “crises” to this one.
The other message is less obvious but arguably more important. Our economy will recover. Curtailing your spending as a client or prospect certainly is understandable but should be combined with a commensurate increase in saving.
Full Article
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