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U.S Economies
Currently, years after recession the GDP per capita and unemployment are very low instead of growing because the crisis was caused by systematic banking. Systematic financial crisis tends to deeply influence a nation’s financial system compared with borderline crises. Economic recovery for a normal recession takes shorter time especially in a V-shaped recovery where the economy returns to trend within a year or two. The post WWII systematic crisis took four and half years to recover. The Great Depression’s recovery was the strongest in U.S history unlike the current 8% growth which is considered as low.
Moreover, there is another issue of cumulative population growth where a 2% real GDP growth did not have any effect on an average person’s income. However, presently, 2% annual GDP growth implied a more than 1% increase in real income per individual. Reinhart and Rogoff argue that the vigorous recovery that followed post WWII crisis returned to its peak faster yet the current financial crisis is still hitting U.S so hard since 2007 (Web). Aftermath of US financial crisis is different from the post war systematic financial crisis that was experienced around the world.
The post war recovery preceded the creation of deposit insurance in 1933 as well as the establishment of a central bank in the U.S. The government played a major role in the economic recovery during the post-World War II leading to faster recovery. According to Reinhart and Rogoff, U.S has fared well compared to other advanced economies which underwent borderline episodes when assessed in terms of GDP per capita (Web). Systematic financial crisis has however made U.S track worse than the countries that did not experience it. Post WWII saw a huge contraction in per capita GDP when compared with the recent crisis. Vigorous growth in output per capita had hardly been experienced in the historic systematic financial crises.
Also, unemployment rate is meaningfully low and may closely be associated with lower rates after 1907 panic when compared with the post WWII unemployment rates. Reinhart and Rogoff assert that unemployment rate during the post WWII was not that serious even though it involved a severe systematic financial crisis (Web). Employment recovery is weaker in the post-WWII compared with the current recovery. The unemployment rate has remained constantly high since 2007-2008 crises unlike post WWII when employment peaked off immediately. Generally, the recent recovery is slower than the post-WWII.
Works Cited
Reinhart And Rogoff. This Time Is Different, Again? The US Five Years after the Onset Of Subprime. VOX, 22 Oct. 2012. Web. 29 Oct. 2013. <http://www.voxeu.org/article/time-different-again-us-five-years-after-onset-subprime-0>.
