Relative to its 5.6 percent long-run average, net investment as a percent of GDP fell by twice as far as it had in any prior postwar recession. More to the point, the recovery in investment has been exceptionally anemic. Today, four full years after the trough of the recession in second quarter 2009, net investment as a percent of GDP is still only 3.2 percent – a level typical of past recession lows. Net investment as a percent of GDP was last at or above its 5.6 percent long-run mean 6½ years ago. Small wonder then that nonfarm payroll employment has been slow to recover too. Through August we had restored less than 80 percent of the 8.7 million jobs lost during the Great Recession. Less well known is the fact that real GDP per capita only recovered its prerecession peak this past summer.5 That’s 5½ years to make up the ground lost during the recession. Previous post-WWII recoveries never required more than nine quarters maximum. A Dallas Fed analysis suggests that the recent financial crisis and its aftermath put the U.S.  4  Net investment includes additions to fixed capital net of depreciation. 5  Real GDP per capita was $ in 2009 dollars in second quarter 2013 versus $ in fourth quarter 2007. BIS central bankers’ speeches  3  back by more than an entire year’s worth of output, an equivalent of more than $ per American household.6 Baker-Bloom-Davis and better comprehending uncertainty And what of uncertainty?
Richard W Fisher: Uncertainty matters (with reference to kinky monetary policy, two nickels and a dime) Remarks by Mr Richard W Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas, before the Causes & Macroeconomic Consequences of Uncertainty Conference, Dallas, Texas, 3 October 2013. *  *  *  The views expressed by the author do not necessarily reflect official positions of the Federal Reserve System. The speaker is indebted to Dallas Fed Senior Vice President and Principal Policy Advisor Evan Koenig for his input in developing the themes articulated in this speech. Thank you, Evan [Koenig] It is a pleasure to share this platform with John Taylor. I first met John at a Carnegie Foundation seminar when he was Undersecretary of the Treasury; I have been among the legions of his admirers ever since. He is thoughtful, no-nonsense and, importantly, dedicated to making monetary policy work with maximum efficacy. We at the Dallas Fed are grateful that he chairs the advisory board of our Globalization and Monetary Policy Institute. And we all, as Americans, are grateful for his service and dedication to our country. Thank you, John, for being the good patriot and man that you are. Uncertainty matters Uncertainty matters. A lot. This won’t be a surprise to many of you. The first thing you are taught in any MBA program, be it at Stanford, where I earned my degree, or anywhere else, is that “business” is the process of managing under conditions of uncertainty.