U.S. Recession Will be Long and Hard

… So says Germany’s respected Die Zeit publication, in a particularly tight and empirically-based piece.

How do they know? Historical precedent:

Two scientists investigated 18 financial and banking crises in developed countries. They found that a crisis caused an average drop in the per-capita economic growth of two per cent. A country recovers only after about two years. Hit especially hard were Spain in the late seventies, Norway in the late ’80s and Finland, Sweden and Japan in the early 90s. Their economic growth, on average, was impacted by as much as five percent, and a real recovery was still not complete after three years.

So are things different in the U.S?… Not at all, despite what we may have been told over this last economic cycle:

The patterns of all crises are all the same: Houses and stock prices rose strongly on the back of both private and public debt and also because foreign investors wanted to play, creating high current account deficits. If asset prices fall suddently, then sooner or later, a collapse in growth follows

Actually, it’s a bit worse than that:

In the case of the USA, in particular, the rise in houses prices and the current account deficit are more pronounced than in previous crises, which does not bode well.

Of particular political interest is the fact that,

… liberalization of financial markets preceded the majority of crisess. Although the United States in recent years saw no legal liberalization, it saw extensive practical liberalization. One has only to think of the many new financial products with abbreviations like the names of robots from Star Wars to understand the banks’s now considerable problems. Or unregulated constructs, such as the so-called “Special Investment Vehicles” (SIV)

Read the entire analysis here on Watching America.com