A Simple Graph That Should Silence Austerians and Gold Bugs Forever
The U.S. recovery hasn't been pretty. But it's been prettier than Europe and Japan, for sure.
There are a million things to say about this graph, and I'm pretty sure that everybody who sees it will find some way to shoehorn it into their previously held opinions. So bear with me, please, as I do that very thing.
Here's what I consider the most amazing thing about this pretty amazing graph. It's not just that the U.S. had the shallowest recession, or the best recovery, among similar countries in Europe and Japan. It's this. We had the shallowest recession and the best recovery primarily because we (a) control our own currency and (b) used aggressive monetary policy to save the banks and lower interest rates while running high deficits.
And yet! Even as we smoked Europe and Japan in the race back to pre-recession GDP, we have actively debated undoing both of the things that clearly made our recovery superior. Weird conservatives have begged us to return to the gold standard at the very moment that an inflexible currency was dooming Europe. Normal conservatives have begged us to cut deficits even as austerity was dooming Europe.
Economics isn't like a science were you can run simultaneous experiments with control groups. But the last five years have been pretty darn close to a global stimulus experiment. Europe has been dabbling with its own 21st-century version of the gold standard while enforcing continent-wide austerity. Meanwhile, we've mostly done the opposite -- with high (if not high enough) deficits and aggressive (if not aggressive enough) monetary policy. The results speak for themselves.