Business expansions, it used to be said, did not die of old age; they were murdered by the Federal Reserve. Yet with the official announcement on December 1st that America had entered recession last December, the traditional explanation for recessions is wearing awfully thin.rnThough it may end up as one of the longest recessions, if not the longest, of the post-war era, the current episode still seems to have more in common with the mild downturns of 1990-91 and 2001 than the more wrenching affairs that came before. As Robert Hall, an economist at Stanford University, notes, earlier recessions, like that of the early 1980s, were caused by the Fed raising interest rates sharply to squelch emerging inflation and holding them high even once the recession began. In the current and past two recessions, interest rates never got very high and the Fed actually began to lower them before the contraction began. In a paper written a year ago, Mr Hall described such apparently "causeless" recessions as perplexing.
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