Shuffle - Desmond Lachman Resident Fellow Desmond Lachman

Paul Ormerod ("Animal spirits rarely stay down for long", July 28) misuses history by asserting that history shows that very few recessions last longer than two years and that once they start most recoveries are strong. He does so by failing to identify the very fundamental way today's US and UK recessions differ from the typical post-war economic recession.

Two principal characteristics radically distinguish today's US and UK recessions from earlier recessions.

First, they have been the result of the bursting of extraordinarily large asset and credit market bubbles that have resulted in acute financial market distress. Second, they have occurred in the context of a globally synchronized recession that makes it difficult for any individual country to export its way out of recession.

Recent research by the International Monetary Fund and by Ken Rogoff and Carmen Reinhart conclusively show that in those rare cases where one has both a domestic banking crisis and a globally synchronized recession, one finds that the recessions tend to be considerably longer than average, while the recoveries tend to be markedly weaker than average.

In framing their policy response to the present economic recession, US and UK policymakers would do well to take that research seriously rather than to engage in wishful thinking that somehow animal spirits will quickly restore the two economies to their potential growth paths.

Desmond Lachman is a resident fellow at AEI.