Likewise, profits and real share prices recovered quite swiftly in America after their initial plunge.To judge the depth of a slump properly, one needs to go further than the CSFB study and compare the shortfall in output relative to the economy's productive potential, had growth continued on its previous trend.
The long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive.
That would imply a 25-30% shortfall in output in the US and Britain relative to trend - which would fully justify Ed Balls's comment that this could be the most serious global recession in more than 100 years.
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.
"Shortfalls in output and employment stunt the economy's future potential as investment projects are put off and as the skills and work habits of the unemployed atrophy.
It is weird that inflation has remained so stable, despite huge shortfalls in output, relative to pre-crisis trends, and prolonged high unemployment.
This helps reach the output potential quicker".
The shortfall in energy output led the federal government to subsidize additional imports of gas from Russia.
The above chart, which is taken from the paper, shows the shortfall in potential G.D.P. relative to the prior trend.
No one predicted that the Fed's new program would return unemployment to normal levels in the foreseeable future, or increase growth enough to eliminate the huge and growing shortfall in economic output since the onset of the financial crisis.
Jason Furman, the chairman of Obama's council of economic advisers, who was visiting London last week, said "there is a massive, massive shortfall" in eurozone output relative to what it would have produced with more expansionary policies.
