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Does anyone have any good recommended articles/reads about why exactly the US recovered quite spectacularly (GDP wise) after the ‘08 financial crisis, while th

by jc_811 2y ago

Does anyone have any good recommended articles/reads about why exactly the US recovered quite spectacularly (GDP wise) after the ‘08 financial crisis, while the EU stagnated so heavily?

tharmas 2y ago
You could also have a look at this paper: "Utilising the Quantity Theory of Credit to Understand the Causes of the 2007 Financial Crisis" https://www.economicsnetwork.ac.uk/archive/starkey_banking2 https://www.economicsnetwork.ac.uk/archive/starkey_banking2
ivewonyoung 2y ago
I think the short answer is stimulus and spending in the US vs. austerity in the EU. And also labor laws and the red tape in company regulations.
- Gibbon1 2y ago
  I will totally agree with that. The US response needed to be double what it was. But at least the sign was in the right direction. I remember at the time reading what the European Central Bank was doing and going it's not acting like a central bank. Was trying to squeeze blood out of the less economically developed southern countries to protect French and German Banks from their own underwriting failures. So that austerity means their response was destructive.
- steveBK123 2y ago
  Two huge factors, agreed. US did bailouts & stimulus, and now compared to COVID arguably far too little stimulus for partisan reasons. Meanwhile the EU was implementing austerity due partially to Germans incessant inflation fears.
  - tharmas 2y ago
    Yes. Bernanke was a keen student of the Great Depression of the 1930s. He argued that a big part of that problem was the lack of money supply. So he did QE (a term coined by Prof Richard Werner, by the way). The only problem was too much of that money ended up in purchasing assets rather than being invested in productive capacities. Hence the asset price inflation we have today. Tory Austerity has absolutely decimated the UK. George Osbourne should be pilloried as being the main architect of its demise. Ideology is a pernicious disease.
    - steveBK123 2y ago
      The monetary side could only do so much and the fiscal side didn’t pull its weight. For better or worse, having a GOP president during COVID lead to more stimulus as the Dems will play along and just add some pro labor addendums. Having Obama in the WH he mostly dealt with nonstop GOP attempts to block any fiscal aid. Not to mention the huge focus on Obamacare by Dems took the eye off the ball. US came out of GFC better than most but we still could have gotten out of it 2x faster.
steveBK123 2y ago
Having lived/worked through GFC I'd say the Europeans smugly originally though this was simply an American banking crises, when really they had deeper more structural intra-EU sovereign debt issues related to North/South growth & budgetary differences. So while US broke the glass and did our bail-outs, the EU tried to extend & pretend for years longer. Kind of the Japan bubble response. The rest can probably be explained by 1)regulatory differences causing huge disparity in industries driving growth where you had substantially all the growth coming from tech in US and 2) demographic differences where Europe is older and aging more rapidly than US, so you have a higher budget burden.
alephnerd 2y ago
> good recommended articles/reads about why exactly the US recovered quite spectacularly (GDP wise) after the ‘08 financial crisis Reaching for a New Deal: Ambitious Governance, Economic Meltdown, and Polarized Politics in Obama's First Two Years 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to Covid-19 The European Central Bank Between the Financial Crisis and Populisms Remaking European Political Economies: Financial Assistance in the Euro Crisis Political and Economic Dynamics of the Eurozone Crisis
- steveBK123 2y ago
  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4952125/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4952125/ https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis https://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion https://www.theguardian.com/business/ng-interactive/2015/apr...

by jc_811 2y ago

Does anyone have any good recommended articles/reads about why exactly the US recovered quite spectacularly (GDP wise) after the ‘08 financial crisis, while the EU stagnated so heavily?

tharmas 2y ago

You could also have a look at this paper: "Utilising the Quantity Theory of Credit to Understand the Causes of the 2007 Financial Crisis" https://www.economicsnetwork.ac.uk/archive/starkey_banking2 https://www.economicsnetwork.ac.uk/archive/starkey_banking2

ivewonyoung 2y ago

I think the short answer is stimulus and spending in the US vs. austerity in the EU. And also labor laws and the red tape in company regulations.

Gibbon1 2y ago
I will totally agree with that. The US response needed to be double what it was. But at least the sign was in the right direction. I remember at the time reading what the European Central Bank was doing and going it's not acting like a central bank. Was trying to squeeze blood out of the less economically developed southern countries to protect French and German Banks from their own underwriting failures. So that austerity means their response was destructive.
steveBK123 2y ago
Two huge factors, agreed. US did bailouts & stimulus, and now compared to COVID arguably far too little stimulus for partisan reasons. Meanwhile the EU was implementing austerity due partially to Germans incessant inflation fears.
- tharmas 2y ago
  Yes. Bernanke was a keen student of the Great Depression of the 1930s. He argued that a big part of that problem was the lack of money supply. So he did QE (a term coined by Prof Richard Werner, by the way). The only problem was too much of that money ended up in purchasing assets rather than being invested in productive capacities. Hence the asset price inflation we have today. Tory Austerity has absolutely decimated the UK. George Osbourne should be pilloried as being the main architect of its demise. Ideology is a pernicious disease.
  - steveBK123 2y ago
    The monetary side could only do so much and the fiscal side didn’t pull its weight. For better or worse, having a GOP president during COVID lead to more stimulus as the Dems will play along and just add some pro labor addendums. Having Obama in the WH he mostly dealt with nonstop GOP attempts to block any fiscal aid. Not to mention the huge focus on Obamacare by Dems took the eye off the ball. US came out of GFC better than most but we still could have gotten out of it 2x faster.

steveBK123 2y ago

Having lived/worked through GFC I'd say the Europeans smugly originally though this was simply an American banking crises, when really they had deeper more structural intra-EU sovereign debt issues related to North/South growth & budgetary differences. So while US broke the glass and did our bail-outs, the EU tried to extend & pretend for years longer. Kind of the Japan bubble response. The rest can probably be explained by 1)regulatory differences causing huge disparity in industries driving growth where you had substantially all the growth coming from tech in US and 2) demographic differences where Europe is older and aging more rapidly than US, so you have a higher budget burden.

alephnerd 2y ago

> good recommended articles/reads about why exactly the US recovered quite spectacularly (GDP wise) after the ‘08 financial crisis Reaching for a New Deal: Ambitious Governance, Economic Meltdown, and Polarized Politics in Obama's First Two Years 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to Covid-19 The European Central Bank Between the Financial Crisis and Populisms Remaking European Political Economies: Financial Assistance in the Euro Crisis Political and Economic Dynamics of the Eurozone Crisis

steveBK123 2y ago
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4952125/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4952125/ https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis https://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion https://www.theguardian.com/business/ng-interactive/2015/apr...