Moral failure
What caused the global crisis and what will the recovery look like?
Last year, the debate over how long the recession would last was between those who thought it would be “V-shaped” - a sharp fall followed by a quick rebound in global growth, with the whole recession lasting only about eight months - and those who thought it would be “U-shaped”, lasting at least two years (three times as long as the 1990 and 2001 recessions) and more than three times as deep.
The US is now in the 15th month of a U-shaped recession, in line with the forecasts of those like Nouriel Roubini, the New York University professor who accurately predicted the financial crisis, earning him the nickname Dr Doom.
A year ago, Roubini thought the risk of an L-shaped recession (a protracted period of economic stagnation like the one experienced by Japan in the 1990s, after its housing and equity bubbles burst) was quite limited. His reasoning was that the US policy response had been so much more aggressive than in Japan, which had waited almost two years after its crash to ease monetary policy and provide fiscal stimulus.
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