Economics, Pethokoukis

The weird 1945 recession and the absolute Mother of All fiscal cliffs


Michael Darda of MKM Partners:

There has been only one fiscal recession in the last 100 years, and even that one (1945) was accompanied by a monetary slowdown. Moreover, during this so-called recession, unemployment rose from an unsustainable 1% to a still-low 3%; the DJIA rose 20% from the peak of the business cycle to the trough. Perhaps this occurred because the recession was exclusively a public sector phenomenon; private GDP was soaring.

A few key charts from Darda:

Here is some more about the strange 1945 recession and what it says about austerity.

One thought on “The weird 1945 recession and the absolute Mother of All fiscal cliffs

  1. Seriously? GIs came home from the war with pent-up demand the likes of which America has not seen since, and five years of forced savings to make it happen. The GI Bill was a major investment in human capital.

    What we have today is spent-up demand. The real estate boom fueled not only housing starts but remodels, additions, new appliances and cars. Then the bust took out $7 trillion in household wealth. College is a fading dream in terms of both cost and benefit.

    Other than that….

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