This Time is Different–McKinsey interview with Kenneth Rogoff
Rogoff is one of the clearest thinkers out there when it comes to understanding the current western economic situation following the financial crisis of 2008. If you don’t have the time to read “This Time is Different” or this paper (written early in 2008 before Lehmans), but want to understand why the US and Europe are in such rough shape a mere 3 years later, then read this interview transcript.
Kenneth Rogoff: The historical experience gives a very clear view that the aftermath of a financial crisis brings slow and halting growth, sustained high unemployment, and surging public debt—with the overhang of public and private debt being the most important impediment to a normal recovery from recession.
It has been utterly remarkable how the United States has been tracking the averages of postwar deep financial crises across a broad range of indicators. On average, it takes four and a half years to get back to the same per capita GDP where you started out and about the same amount of time for unemployment to stop rising.
Indeed, we haven’t yet gotten back to the same per capita GDP where we started. Our perspective is that we have never left the recession; we’re still very much in it. I hope in another two or three years things will be feeling more normal. But there are a lot of difficulties to traverse before we get there.