Where Is the Economy Headed?
First, to understand where the economy might be headed, we should take a look at where it has been recently.1 A year ago, our economy–indeed, all of the world’s major economies–were reeling from the effects of a devastating financial crisis. Policymakers here and abroad had undertaken an extraordinary series of actions aimed at stabilizing the financial system and cushioning the economic impact of the crisis. Critically, these policy interventions succeeded in averting a global financial meltdown that could have plunged the world into a second Great Depression. But although a global economic cataclysm was avoided, the crisis nevertheless had widespread and severe economic consequences, including deep recessions in most of the world’s major economies. In the United States, the unemployment rate, which was as low as 4.4 percent in March 2007, currently stands at 10 percent.
