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More than ever before, people are being asked to make decisions and take responsibility for managing their finances. This is an area that many people can find daunting and confusing. For some, thinking about their long-term financial security is dispiriting or even distressing, particularly if they are struggling to manage debt or other commitments. The number and complexity of choices to be made have increased dramatically over the last 25 years, so that many find it hard to understand financial products and the risks associated with them. At the same time, many consumers do not have access to face-to-face financial advice – even elementary advice on the basics of money management. Meanwhile, the. | October 14 2012 This Time is Different Again The United States Five Years after the Onset of Subprime Carmen M. Reinhart and Kenneth S. Rogoff Harvard University Five years after the onset of the 2007 subprime financial crisis GDP per capita in the United States remains below its initial level. Unemployment although down from its peak is still hovering near 8 percent. Rather than the V-shaped recovery that is typical of most post-war recessions growth has been slow and halting. Based on our research Reinhart and Rogoff 2009 this disappointing performance should not be surprising. We have presented evidence that recessions that are associated with a systemic banking crises tend to be deep and protracted and that this pattern is evident across both the historical and cross country experience. Subsequent academic research using different approaches and samples have found similar results.1 Recently however a few op-ed writers have argued that in fact the United States is different. International comparisons are not relevant because of profound institutional differences from other countries. A recent spate of op-ed writers including Hevin Hassett and Glenn Hubbard Michael Bordo and John Taylor have stressed that the United States is also different in that recoveries from recessions associated with financial crises have been rapid and strong. Their interpretation is at least partly based on a study by Bordo and Haubrich 2012 which examines the issue for the US since 1880. In this note we question their interpretation of the US historical track record which is incorporated in Reinhart and Rogoff 2009 where we present results of 224 historical banking crises from around the world including pre-2007 banking crises in the United States. Perhaps part of the confusion in the recent US is different op-eds is a failure to distinguish systemic financial crises from more minor ones and from regular business cycles. A systemic financial crisis affects a large share of a country s .
