Economic Recovery: Will Slow and Steady Win the Race?


Washington Post columnist Neil Irwin stopped by to discuss his book, The Alchemists: Three Central Bankers and a World on Fire. It's a great read on the history of central banks, including how they responded to the financial crisis and the challenges they face in the future.

In this video segment, Neil shares his views on the recovery so far, and the bumps in the road. We're seeing steady growth, but are we out of the woods? A full transcript follows the video.

Morgan Housel: We're lucky today to have Neil Irwin from the Washington Post, one of my favorite macroeconomic writers. He's written a book called The Alchemists, which talks about central banks around the world -- the history of central banks in the last few years. Please welcome Neil.

Neil, you're not an economist, but you're one of the better economic writers out there. I just want to ask, from a broad point, how is the economy looking today?

Neil Irwin: You know, it's funny. Every time I look around and try and write about the economic data of this last three years -- really four years -- since the economy's been recovering ... we economics writers, we're a little bit excitable.

A bad jobs report comes over, or a bad housing report, we say, "Oh no, we're going back into recession." Or then there's a couple of good jobs reports or good consumer spending reports; we say, "Oh, happy days are here again. We're finally breaking out of this pattern we've been in."

But when you look over the longer time horizon, this has been a shockingly consistent four years, and I think the same pattern is going on right now. We're growing at 1.5-2%, steady growth, nothing exceptional, nothing to claw us out of this pit the economy has been in since the recession, but also not a double dip. Not really a faltering recovery, not a recovery that's getting outside of this pattern.

We're still in this pattern of 2% growth, and that beats Europe, that beats Britain, it beats Japan. It's not what Americans are used to, and not what we would expect in this U.S. economy.

Morgan: So we've had these bumps over the last three years; 2011 ... there was another bump early last year. When the economy starts slowing down, everyone thinks we're heading back into the recession. Is that a function, do you think, of us just being too pessimistic because we're all still thinking about 2008, or have there been legitimate slowdowns that we should have been worried about?

Neil: There absolutely have been things to worry about the last few years, and some times when it looks like we might be tipping back into recession.

One was that summer of 2010. If you remember, that was a kind of dark period that ultimately resulted in QE2 out of the Federal Reserve. Summer of 2011 as well; you had the debt ceiling standoff, you had a lot of just really jittery companies and corporate decision makers around the debt ceiling.

At the same time Europe seemed to be, just the wheels coming off. Europe really seemed to be at the verge of unraveling in that summer/fall of 2011. Both of those were moments where it looked like things were going in a dark direction.

A combination of maybe a little luck, maybe a little activism by the central banks, a little activism by the political authorities in Europe and elsewhere, finally got us over those humps and avoided a double-dip and avoided a new collapse.

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