Vanessa Malfitano
May 5th 2013
Managerial Economics

Economic Brief: The Lesser Depression

The global economy will grow just 2.4% this year. The growth percentage encompasses estimates from all countries including Asia, China and the faster-growing developing capitalist economies, according to the latest World Bank Report (Source). This is about the same amount of growth achieved in 2012 and unfortunately, the bank only predicts that the growth percentage in 2014 will reach 3.3%. The big question is has the economy overcome the recession or is it truly in the early stages of recovery, which has been labeled the post-recession years. The Great Recession is defined as a span of two and a half years of severe financial hardship beginning in December 2007 and ending June of 2009. This caused an economic crisis that is still felt by many professionals today. As of December 2012, the fifth year anniversary since the recession began; the unemployment rate is more than three percentage points above the annual rate in early 2007 at 7.8 percent, right before the Great Recession hit. Furthermore, for being in the post-recession years, statistics show that as of December 2012, 9.1 million jobs still need to be created to restore prerecession labor market health in the United States. Analyzing the facts and breaking down the numbers does not show promising data that the United States is a thriving country on the upswing to a prosperous economy. The root of the United States’ current economic hardships is an ongoing and scarcely improving shortfall in collective demand relative to the supply of productive resources. Indeed, this shortfall is why Paul Krugman has labeled the present situation the “Lesser Depression” (Krugman 2011). The disappointing performance of the global economy over the past two-and-a-half years is no puzzle that needs explanation. After five years since the beginning of the Great Recession, the workforce is nowhere near a full recovery. The recession inflicted enormous, long-lasting economic damage, particularly on the labor market and on the living standards of families earning a low to middle class income. The root of the damage is a shortfall in households’ and businesses’ lack of demand for goods and services. It is predicted that in late 2013 federal fiscal policy will likely make no progress in shrinking the output gap (Source). The good news is fixing the global economy is a problem that can be solved with an effective strategy. Conventional monetary policy has been exhausted, and neither unconventional monetary policy nor other channels of currency depreciation seem capable of cushioning fiscal drags, let alone spurring faster growth rates than those experienced since mid-2009. Closing the output gap entirely through expansionary fiscal policy would likely require roughly $650 billion of deficit-financed fiscal stimulus in 2013, as well as substantial stimulus in 2014 and 2015 to avoid recurring “fiscal cliffs” in those years. All in all, we estimate policymakers truly committed to a full and durable recovery would need to target roughly $1.5 trillion to $2.2 trillion in additional fiscal support over the next three years. The top policy priority must be ensuring a rapid return to full employment. It is time to stop taking for granted the automatic return to full employment presumed by the policymaking elite, and instead use proven policy levers to force its return. Currently, purchasing pornography from a store or soliciting prostitution is enforced with a slap on the wrist. Adding violent online pornography to the list to monitor will be even more challenging for law enforcement in Iceland, whose manpower is already stretched very thin. In addition, violent online sex material can be defined in a number of ways. In order to avoid false arrests, based on personal opinions of the police, a clear definition of illicit sex