When is the next global recession and how severe is it?

[King]

What goes up must come down, and since most of the world has yet to go up from the 2008 crash, I'd say we're a good decade away from having to come down again.

[King]

I'm amused at all the posts that say there won't be another global recession for a decade or more. If you look at the list in the post I've quoted, then it's pretty clear that the longest period in the last 40+ years without a global recession was seven years from 1983 to 1990. We are almost 6 years past the end of the last recession. Adding another decade would make it a record recovery period by more than double the historical best. That seems farfetched to me.

I've already stated why I don't believe that type of analysis to be correct. Downturns happen because of overaggressive upturns not because of some prophetic timing. We've never had a recession-free period longer than 7 years because we've never had a giant recession followed by slow steady growth before. Recessions in recent US history are generally followed by 7+% GDP growth years and other unsustainable booms that make us due again. We are not experiencing that at this moment. There is still too much untapped GDP potential in this economy in many sectors.

Much has been made in general about how our rebound from the 2008 crash has been atypical. If that is the case, the business cycle should also be atypical.

[King]

I stand by my statement as a matter of statistics. There's no question that deviations from the average are to be expected. But the greater the deviation, the less likely it is to occur. Since 1970 only one year (1984) had real US GDP growth in excess of 7%. The economic growth in the US in 2010 (2.5%) is not so different as the first year recovery from the tech bust in 2003 (2.8%).

The 2003 recession was really a recession with a small r.

It cannot be understated how much we lost during the 2008-09 crash, which I believe many people who predict we're due for a recession are doing. 

Here is a quick spreadsheet I made, which extrapolates if we maintained 2.5% annual GDP growth (a reasonable number), after the year 1999--which was a year of full employment, peace, and ideally the US economy's potential. As you can see, even with the dotcom bubble recession, we more or less maintained this prosperity level, but after the 2008 crash we completely fell off the wagon.



The economy is running well under $1 trillion GDP short of it's potential. The idea of us going through another recession any time soon is nuts. There's too much capital and human potential still sitting out there.

Recessions happen because they need to happen not because some arbitrary period of time has passed.