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American Enterprise Institute for Publicy Policy Research: After the Fall

The American Enterprise Institute for Public Policy Research predicts the retrenchment period following the 2007 subprime collapse to last nearly a decade.

9/1/2010
In its After the Fall paper, the American Enterprise Institute for Public Policy Research (AEI) examines real GDP, unemployment, inflation, bank credit, and real estate prices in the times surrounding economic shocks. AEI examined these factors for a 21-year window around the 1929 stock market crash, 1973 oil crisis, and 2007 U.S. subprime collapse.

The research focuses on the long-term effects of these financial situations. AEI finds that the 2007 downturn was fueled by credit expansion and rising leverage beginning 10 years prior to the actual event. It is now likely to be followed by a long period of retrenchment, and AEI predicts that time to last nearly as long as the preceding credit surge.

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