Remembering the toll of the Great Recession and bracing for the current one

It's worth recalling how the Great Recession that began for the United States in late 2007 impacted so many people since we're not into what will apparently be a worse one. Colleen Shaley reported (The financial crisis hit 10 years ago. For some, it feels like yesterday Los Angeles Times 09/15/2018):

For many Americans, the significance became apparent when they faced a layoff or the loss of a home — and the ramifications were felt for years. Nearly 9 million people lost their jobs and at least 10 million lost their homes. Within four years, 46.5 million Americans were living in poverty.

The National Bureau of Economic Research (NBER) defines the earlier recession as dating from December 2007 to June 2009. That means that what turned out to be a continuing increase in the GDP had begun by June 2009, not that the effects of the recession had been erased or that the condition of those negatively affected have returned to the status quo ante.

NBER provides this explanation of its dating of the current recession started in February 2020:

The committee also determined that a peak in quarterly economic activity occurred in 2019Q4. Note that the monthly peak (February 2020) occurred in a different quarter (2020Q1) than the quarterly peak. The committee determined these peak dates in accord with its long-standing policy of identifying the months and quarters of peak activity separately, without requiring that the monthly peak lie in the same quarter as the quarterly peak. Further comments on the difference between the quarterly and monthly dates are provided below.

A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion. [my emphasis]

Yanis Varoufakis talks about the comparisons he makes between what he calls the 2008 and 2020 recessions in this video, 2008 & 2020: The Combination That Changed Capitalism Forever New Economic Thinking 07/03/2020:

He actually frames his argument as showing how the current crash is a continuation of the previous world economic crisis (2008). He's talking here in the context of the framework he establishes in his book The Global Minotaur (2013) that the end of the Bretton Woods system in 1973, the trade deficits of the US became the primary center for the recycling of capital in the international financial system. He sees that system as having been in a continuing crisis since 2008.

This includes an explanation about how Germany's current economic policy has a strong tendency to create credit bubbles in other eurozone countries.

He also addresses on the most striking oddities of the current economic moment, the fact that the stock market is doing extremely well while the real economy is reeling in so much of the world. The current bailout money made available by the Federal Reserve in the US and ECB in Europe to cushion the current recession is going primarily to large corporations via large financial institution. (This is a continuation of the broad policy for responding to the Great Recession.) And the CEOs and governing boards of those corporations receiving the money have strong incentive to juice the stock market by buying back their own stock:

[I]f you are now in the shoes of the CEO of a car company in Europe, let's say, and you get all this free money from the central bank, ... what do you do with this money? Do you invest it in more cars? You see that people out there won't be able to buy them, won't be able to afford them at prices that are profitable for you. Well, no, there's actually something much easier that you can do. You can take the dosh [money] and you can take it to the finacial markets, to the stock exchange and buy back your own shares. So that's what's going to push them through the roof, the company seems to be doing very well, and you're doing very, very, very well, thank you so much, personally, because your bonus as a CEO, member of the board,  board of directors and so on, hinges on the share price.

That creates a very interesting situation. Financial markets are doing extremely well, the real economy doing extremely badly. Never before did capitalism generate this disconnect between huge quantities of savings and liquidity, on the one hand, and very low - by comparison in relative terms - levels of actual investment in fixed capital [plant and equipment]. This disconnect is the reason why we've been having trillions and trillions and trillions of dollars, dollar-denominated debt in negative-yielding territory, negative interest rates. It is why we had deflationary forces producing the political monsters across the world, because deflation, unlike inflation, deflation poisons politics.

But that's yet another discussion to have, especially with my German friends who for some reason misunderstand their own history and keep on believing that it was hyperinflation that gave rise to the Nazis. No, it wasn't.  It was deflation, after Herr Brüning introduced in 1930 fears and stringent austerity that started pushing prices downwards, creating deflationary forces that took over effect. (after 19:30 in the video; my transcript and my emphasis in bold)

That last point is worth remembering. I wrote about it in Did Heinrich Brüning have no other choice but austerity economics in the Great Depression? 01/09/2013.

That's also why tax cuts on corporate profits don't automatically induce more real investment, especially during recessions.