The Cause Of The Weak 2001-07 Recovery
What was the cause of this? The NYT journalist, Floyd Norris mentions one of the explanations, namely that the 2001 recession was so short and mild and that the weak recovery was in part a pay-back for this. However, he argues that this can only explain some of it since the expansion even including the previous recession was slower than previous ones. However, what he fails to consider was that the 2001 recession really should have been a relatively severe one, since it came after a massive tech stock bubble had been deflated and large imbalances had been accumulated. Normally, when you see bubbles like that you have sharp downturns afterwards. But because Greenspan quickly inflated a housing bubble by cutting interest rates from 6.5% to 1.75% in less than a year the recession was shallow.
The payback for this came in two forms. Both in the relatively slow boom between 2001 and 2007 and in the new recession that most likely started in November 2007 (I see that like me, Norris dates the end of the peak of the boom to October 2007)