Seven More Years of Hard Times?

It is not true that if you break a mirror, you will have seven years’ bad luck. But if you allow a financial market to spin wildly until it breaks down, it really does seem - based on historical patterns - that you run the risk of years of economic malaise.

NEW HAVEN – Much of the talk emerging from the August 2010 Jackson Hole Economic Symposium, attended by many of the world’s central bankers and economists, has been about a paper presented there that gave a dire long-runassessment of the future of the world’s economies.

The paper, “After the Fall,” was written by economists Carmen Reinhart and Vincent Reinhart. Their work draws upon a recent book that Carmen Reinhart co-authored with Kenneth Rogoff, entitled This Time Is Different: Eight Centuries of Financial Folly.

According to the Reinharts’ paper, when compared to the decade that precedes financial crises like the one that started three years ago, “GDP growth and housing prices are significantly lower and unemployment higher” in the subsequent “ten-year window.” Thus, one might infer that we face another seven years or so of bad times.

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