The real estate market has gone through a major adjustment, declining by 30% compared to its pre-crisis peak; excessive leverage of households and financial firms has been reduced; and the US current account deficit has roughly halved relative to pre-crisis levels, to about 3% of GDP. The adjustment will only remain durable, however, if efforts to complete the necessary reforms continue.
These include continuing financial sector and regulatory reform; designing a credible strategy for medium-term fiscal consolidation to ensure the sustainability of public  1  See “The Great Moderation”, remarks by Federal Reserve Chairman Ben Bernanke at the meetings of the Eastern Economic Association, Washington DC, 20 February 2004. 2  See Rogoff, K., “The Second Great Contraction”, Project Syndicate, 2 August 2011.