Robust Growth or Anemic Recovery in the U.S. and the Global Economy

It is a real pleasure to be here to share some of my views. I am going to focus my remarks mostly on the short- to medium-term and on the demand side. Most of this panel has demonstrated why economics is often referred to as the "dismal science" - and this crisis has given us every right to be dismal. In the competition among the panel, I am going to try to out-distance the other panelists and be a little more dismal than they are about the short- to medium-term. I want to begin by putting the problem in context by thinking about the world as it was before the crisis. What sustained the American economy and, to a large extent, the global economy was America's housing bubble (and bubbles in a number of other countries), and that housing bubble allowed a consumption boom. As already mentioned by several speakers, this is what kept the U.S. economy going. It fueled high levels of consumption and a household savings rate that was close to zero. It was clear to almost everyone that this was not sustainable, which has been said many times in this session. Herb Stein once said, "That which is not sustainable will not be sustained." And it was not. As we officially emerge from the recession - the NBER has not confirmed it yet, but there has certainly been growth - the question really is, what will replace the sources of demand that existed prior to the crisis