There is no doubt that the economic crisis that begun in 2007 has brought serious implications to many governments. Among the greatest challenges is the process of recovery from the effects of the economic crisis. Michael Bordo of the Wall Street Journal argues that many an economic policy makers are mistaken in believing that economic recessions are associated with slow economic recoveries. In support of this argument, he cites the rapid increase in performance of business cycles in the United States. This is contrary to the findings presented by economists Rogoff Kenneth and Reinhart Carmen in the book This Time is Different. In support of his views, Michael Bordo uses the “plucking model” developed by Milton Friedman that argues mild expansion and large expansion among businesses often follows mild economic contraction and large contractions in business respectively.
An analysis of economic statistics from the National Bureau of Economic Research further confirms Michael Bordo’s arguments. However, Bordo is quick to add exceptions to the reasons behind the slowed recoveries in particular sections of the economy. For instance, the housing sector was largely blamed for having sparkled the financial crisis and hence, it led to the collapse of residential investment. The housing sector has taken a slowed economic growth. Another exception provided in the article are uncertainties associated with regulatory and fiscal policies. The implementation of expansionary monetary policies in helping to bring changes to the economy have brought less desired changes as far as economic performance is concerned. For this reason, Michael Bordo summarizes by suggesting that it is emphatically crucial to implement other policies to aid economic recovery other than the application of monetary policies, which appear to be looser.
Work Cited
Bordo, Michael. “Michael Bordo: Financial Recessions Don’t Lead to Weak
Recoveries”. The Wall Street Journal. 27 September 2012. Web. 1 October 1,
2012
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