2000s the Worst Decade since 1930s

While many look forward to several years of slow growth as the economy stumbles its way out of a debt overhang, many forget that we what we have already experienced. The 2000s was a decade that could be classified as a 10yr bear market. In real terms the US stock market is far from its 2000 peak. Even in nominal terms the market has gone nowhere.

GDP growth during the 2000s was the worst since the 1930s (see Economist) at about 1.9% per year. If you also look at consumption relative to incomes the picture looks worse.

The year 2000 essentially marked the peak of real wealth creation in the US [wealth was created during the 1990s by the proliferation of the Internet]. [Of course, this real wealth creation - as with the railroad, canals, etc. - led to a speculative bubble that burst in 2000, but this bubble wasn't merely driven by paper.]

After the 2000-2001 recession, the US economy inflated its way to ‘prosperity’ by promoting a housing bubble. While many felt rich as the value of their homes rose, this was merely an effect of easy money [and cheap imports from China] rather than real wealth creation. Today’s recession is the the result of our actions to avoid pain during the 2000-2001 period. What should have been a moderate recession in 2000-2001 was postponed via easy money until it became a near depression.

If we had taken our hits during the 2000-2001 recession and not attempted to replace real wealth creation with cheap money from 2002-2007 the US economy would be in a much stronger condition than it is today.