Joseph S Tracy: A strategy for the 2011 economic recovery Remarks by Mr Joseph S Tracy, Executive Vice President of the Federal Reserve Bank of New York, at Dominican College, Orangeburg, New York, 28 January 2011. *  *  *  Good morning. It is a pleasure to be with you this morning to look back on the tremendous events impacting the economy over the past several years, and to assess the outlook for the economy going forward. Let me note that the views that I will discuss with you are my own and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System. On September 20, 2010, the National Bureau of Economic Research (NBER) determined that the “Great Recession” officially ended in June 2009. The Great Recession did not earn its moniker due to its length. At 18 months, the length of the Great Recession was only slightly longer than the average of 17.5 months for the 33 recessions tracked by the NBER since 1857. In fact, the longest recession was 65 months and lasted from October 1873 to March 1879. The Great Recession distinguished itself from earlier recessions in terms of its severity rather than its length. There was a decline in real output relative to trend of $ trillion or 8 percent (Chart 1). This contraction brought the level of real output back to its level in 2006. In most recessions, consumption growth slows but remains positive.
Total completed foreclosures including short sales and deeds-in-lieu from the beginning of 2008 until the end of the third quarter of 2010 represent around 58 percent of all foreclosure starts over that same period. In addition, in each quarter the pace of foreclosure starts has exceeded the pace of completed foreclosures. At best, then, we are only halfway through the resolution process. To conclude where I began, the name “Great Recession” is also appropriate in that it reminds us not only of the severity of what took place, but also of the travesty that was avoided – that is, the second Great Depression. This was only possible with the aggressive monetary and fiscal policy actions that were undertaken both domestically and abroad. Much was learned in the process about how to effectively deal with a financial crisis, and much remains to be learned about how to prevent them from recurring in the future.