In it, Grant discusses the rationale for a rather zippy (or "V-shaped") recovery following this steep recession that began (officially) in late 2007. Here are some excerpts from that piece:
"The Great Recession destroyed confidence as much as it did jobs and wealth. Here was a slump out of central casting. From the peak, inflation-adjusted gross domestic product has fallen by 3.9%. The meek and mild downturns of 1990-91 and 2001 (each, coincidentally, just eight months long, hardly worth the bother), brought losses to the real GDP of just 1.4% and 0.3%, respectively...
...Americans are blessedly out of practice at bearing up under economic adversity. Individuals take their knocks, always, as do companies and communities. But it has been a generation since a business cycle downturn exacted the collective pain that this one has done.
Knocked for a loop, we forget a truism. With regard to the recession that precedes the recovery, worse is subsequently better. The deeper the slump, the zippier the recovery. To quote a dissenter from the forecasting consensus, Michael T. Darda, chief economist of MKM Partners, Greenwich, Conn.: "[T]he most important determinant of the strength of an economy recovery is the depth of the downturn that preceded it. There are no exceptions to this rule, including the 1929-1939 period."
If you'd like to read more, see the full piece at the link above.
Related articles and posts:
1. Jim Grant on CNBC: get set for inflation - Finance Trends
2. James Grant on Bloomberg TV - Finance Trends
3. "Jim Grant: Ringing the Bell at the Top?" - Financial Armageddon.
4. The Aftermath of Financial Crises - NBER.
