Tom Keene Talks to Ethan Harris

Judge Richard A. Posner of the U.S. Court of Appeals just wrote a piece in The New Republic titled “Let’s Be Honest: We’re in a Depression, Not a Recession, and There Is No End in Sight.” What’s the textbook way out of this?
Well, I think that we need to be careful when we use a word like depression. In the Depression, we had unemployment of over 25 percent. So what Posner is talking about is not a depression in the 1930s sense, but an economy that refuses to come out of its funk.

What gets us out of the funk is getting banks past the worst of their bad loan problems. It is getting the foreclosure process worked through. It is getting household balance sheets improved to the point where people feel like they can spend again. But I think Posner is correct in saying it is hard to see where the end is in this process. If we can keep our economy growing in the next several years, I think we will come out of this kind of depression-like state of slow growth.