A picture makes it clear: the recession IS over

Not that many people will know it for quite some time

Below are two graphs that show an awful lot about our current economic situation. The first shows that the recession is probably coming to an end. The second that, as we come out of it, only a small fraction of people may benefit.

First, by way of economist Steve Keen, a graph showing that the level of private debt — an indicator of how much businesses and individuals are borrowing—is now going up again after a long decrease during the recent crisis. Keen and many others have argued convincingly that this level of private debt is the key factor driving booms and busts; in good times, people borrow more to invest in businesses, speculate on houses, etc., while in bad times everyone pulls back and plays it safe.

So, as you see below, we seem to be going from bust back towards boom:

Second, as I learned from Mark Thoma, a recent study has demonstrated a remarkable divergence between economic productivity per person and median family income. In short, we’re getting economically ever more productive (at least in the crude way productivity is measured), but the benefits of this productivity aren’t going back to the bulk of the population. Thoma calls it “the most important economic chart”, and I wouldn’t disagree:

So, good and bad. Good for some people, not so good for others. The latter study is here. I think the issue depicted in the latter graph is by far the more important of the two. Boom and bust is an old story, we just don’t seem to be able to manage it very well. This divergence between productivity and median family income suggests some profound new development in our economies.

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