Returning to Growth
Nicholas Crafts has just posted a piece on Vox, which examines policy lessons from past severe recessions (click here). In particular, he looks at the recessions of 1930-32 and 1979-81. Among other things, he advocates stimulating private house-building as the stock of houses is estimated to be three million below the long-run equilibrium. Tim Besley and Tim Leunig have some radical suggestions as to how this can be achieved - click here. Of course, the impact of this policy will be to drive down house prices, and, in the process, raise defaults on mortgages, further damaging bank balance sheets.