It seems that Ben Bernanke and fellow central bankers had a sobering moment during their annual Jackson Hole retreat. One of the papers presented at the meeting was titled "After the Fall," by Carmen and Vincent Reinhart. The paper studied previous financial crises and country specific shocks including the 1929 stock market crash, the 1973 oil shock, the 2007 U.S. sub prime collapse and fifteen severe post-World War II financial crises to determine how economies recovered over a 10 year period following the event. The results were not encouraging and portend a similarly grim fate for the US and European economies: low GDP growth, high unemployment, and declining home prices. It will feel pretty much like a perpetual recession for the real economy. Here are the main conclusions from the paper:
