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August 05, 2002

Doom-Gloom from Stanley Roach

More sobering analysis from Morgan Stanley's Stephen Roach on why we shouldn't expect a quick recovery. He argues that most economists are comparing this business cycle to post-World War II recessions, when the more pertinent comparison is to 19th century recessions:

This business cycle has little in common with those of the recent past. Unfortunately, it does have a lot in common with the pre-World War II boom-bust cycles triggered by speculative bubbles in financial markets. History tells us that the 19 peacetime cycles from 1854 to 1945 had recessions with an average duration of 21 months -- essentially double the 11-month duration of post-1945 recessions. Post-bubble shakeouts are long and painful. Why should this one, following on the heels of the mother of all bubbles, be any different?
I tend to favor Roach's 19th century view of the economy -- the rule of corrupt Robber Barons sure feels right.

Posted by Nathan at August 5, 2002 09:51 AM

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