The recession that struck the U.S. in 2007 has cost consumers about $7,300 each in lost spending, according to a San Francisco Federal Reserve economist.
In a paper published Monday, Kevin Lansing, a senior economist at the Federal Reserve Bank of San Francisco, wrote that if personal consumption had continued on from December 2007 to the present day at the same rates that it occurred from 2000 to 2007, Americans would have each spent an extra $7,356 by now.
Taken over a period of 42 months, that's about $175 in lost spending per month, Lansing writes.
However, it's not necessarily true that personal consumption should have continued on at pre-2008 rates. That kind of spending was symptomatic of a bubble economy, Lansing notes in the paper, and "was bound to slow sooner or later."
The climbing rates of consumption may not have been "economically desirable," he writes, in part because Americans were saving so little and taking on so much debt. And much of that spending was made possible by "unsound lending practices," which have since come under scrutiny.
In an interview with Bloomberg, Lansing said the pre-recession spending reflected an "artificial economy that was driven by debt."
Real consumer spending took a nosedive in December 2007, the official start of the recession, which was declared to have ended in June 2009. Lansing points out that after the recession of 1990-91, personal consumption took 23 months to recover to pre-recession levels; by contract, current personal consumption is still 1.6 percent below its pre-recession peak, 42 months later.
Last month, the U.S. Department of Commerce reported that month-over-month consumer spending rates were virtually unchanged in May, making for the weakest month in spending since September 2009. It was suggested that inflation, particularly in the form of high gas prices, accounted for the slowdown in spending.
And it seems as though spending remained sluggish during June, according to economist forecasts showing that retail sales probably stagnated during that month. The Commerce Department will release its figures for June on Thursday.
In his report, Lansing notes that policymakers might have done more to address the housing bubble while it was happening.
In particular, he cites monetary policy as an instrument central banks can use to prevent harmful deflation. Lansing writes that interest rate policy could have "a distinct advantage" over regulatory measures "because vigilant central bankers can deploy it against bubbles regardless of the regulatory environment."
Given the costly results of the housing-bubble burst, Lansing writes, "the case for preemptive action against bubbles may be strong indeed."
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