The causes of the Great Recession have been subject to much fruitless debate. A recent book House of Debt by Atif Mian and Amir Sufi and a review of Timothy Geithner's book Stress Test by Paul Krugman provide some of the most convincing analysis to date. Geithner's book itself focuses on the bank run that triggered the recession and the steps taken to restore confidence but, as Krugman's review makes clear, although the recovery of confidence in the financial markets was achieved relatively quickly, and surprisingly cheaply, a full recovery from the Great Recession has yet to be achieved. Krugman is critical of the narrowness of Geithner's vision in approaching this problem since it is clear that the Great Recession was not simply due to the loss of confidence in the financial system. The fundamental problem appears to have been the doubling in household debt between 2000 and 2007. It has taken years to begin to clear this debt load and the task is still incomplete.
Debt is a financial issue but it is also a moral problem. We have been sold a bill of goods by our leaders, that wages could stagnate for decades but our living standard would continue to rise. The inherent contradiction was inevitably going to cause chaos. Our leadership was unwilling to admit that middle and lower class wages have stagnated, in large part due to their actions, and they turned a blind eye to the house of cards being constructed from the staggering increases in personal debt during the lead up to the Great Recession. They seemed to believe that things would be fine as long as they weren't actually leading the charge when the stampeding herd finally arrived at the cliff. Although Bush II fully deserved his own fall from the cliff, a failure of this magnitude had many fathers.
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