It doesn't take a Ph.D. in economics to know this is a very elderly expansion. The exact timing, causes and severity of the next downturn are the big questions.

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Somebody sent me a link to a story headlined “Will The Next President Face a Recession?” I didn’t even click on it because the answer is almost surely, yes.

According to Forbes, the length of the average expansion is 34 months, going back to 1854. The longest, which began under President George H.W. Bush and continued under Bill Clinton was 120 months. So far, the current expansion is almost 88 months old. So do the math.

Despite its slow pace — whether from the secular stagnation theory of Larry Summers or the “no big new revolutions” theory of Robert Gordon — the recovery and expansion have been remarkably durable. These seven-plus years in America have weathered the Greek-euro crisis, meltdown of the BRICs, oil-price collapse (we’re a major oil producer as well as consumer), and so far the special headwinds of China’s slowdown.

In the modern era, many recessions were triggered by Federal Reserve missteps, raising interest rates too fast or too high. (I wrote on Sunday about why rates have never been so low for so long). The Great Recession, like the contraction that preceded the Great Depression, was unusual in that it was caused by a huge buildup of leverage, financial rackets and unsustainable bets, followed by a global panic.

Prior to 2008, Americans had been lulled by what some economists call “the great moderation” — low inflation, decent growth and moderate, short-lived recessions. This ran from the end of the nasty 1981-82 recession until the deregulated banking Titanic hit the iceberg in 2008. At the time much of it was credited to the stewardship of Fed Chairman Alan Greenspan, who achieved numerous “soft landings,” including during the Asian debt crisis of 1997. Greenspan’s reputation was not so spiffy after we went through the consequences of the deregulation and laissez faire economics he championed.

I remember in the ’90s where experts mused about “the end of the business cycle.” HAHAHA. So the cycle will reassert itself downward at some point, whether from a shock, Fed misstep, or exhaustion. When it happens, it will likely arrive in Seattle later than most places, if history is a guide. Unless, that is, the downturn is triggered by a stock collapse in the tech sector or a shock to Boeing (which continues to feel the weight of the global slowdown).

Housing prices will fall. The downside: Fewer people will have the means to buy.


Today’s Econ Haiku:

Gates gift to the U

Unwraps a Seattle strength

Great civic stewards