By 1933, hosts of financial institutions had failed, real GDP had fallen by over 25 percent, unemployment was 25 percent and the nation had experienced annual double-digit rates of deflation. The Fed’s passiveness in 1929–33 was associated with an economic catastrophe. Let me summarize my review of Federal Reserve performance since the beginning of the Great Recession in December 2007.
The global economy expanded rapidly in 2006, and while some moderation is projected this year, global activity is expected to continue to grow strongly. Economic growth in the euro area increased by 2.7 per cent in 2006, its fastest pace in six years, and activity has remained robust in the first half of this year.