Wednesday, January 19, 2011

Lost Output As Result of Great Depression

This graph shows the actual loss of output up to Q3 2010 and the estimated loss up to the end of 2011. Potential GDP is the output of a fully employed economy and it is indicated by the trend line. We will have lost around $3 trillion of output by the end of 2011. The Obama stimulus of $800 billion was well below what was needed to compensate for the loss of private spending during the recession. The GOP explains the loss of output as the result of government regulations that have had a negative affect on business confidence. I guess that the lack of regulation that contributed to the financial crisis that sank the economy has been committed to the historical black box that contains memories that are inconsistent with ideology.

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