Ken Rogoff's economic forecast

“Prior to the 1950's, output drops of 15-20% in a single year were routine (admittedly, national income accounting was more primitive.) A number of academic
economists say we should simply tough it out as we did back then. Recessions have important cleansing effects, helping to facilitate painful restructuring.

But today's social, economic, and political systems – at least in developed countries – are unable to withstand a peacetime decline in output of 15-20%
within a short period. Massive stimulus and intervention – the US Federal Reserve's current stance – is unavoidable. One can only hope that the state can get out of the economy half as fast as it is getting in. Nevertheless, the distinct possibility that stimulus and restructuring may work is further cause to hope that the deepening recession will not morph into a full-blown depression.
...
2009 will be a tough year. Yet, absent a large-scale conflagration, there is a fair chance that 2010 will see a restoration of weak growth in the US, Europe,
and Japan, and probably robust growth in most emerging markets. The US economy may have lost a fair chunk of its mojo, but it will require a lot more bad luck and
policy blunders to get to a second worldwide Great Depression.”

Kenneth Rogoff, "Has America Lost its Mojo?", Project Syndicate (January 2009).

http://www.project-syndicate.org/commentary/rogoff52/English

[DOW: Harvard economist Kenneth Rogoff was formerly chief economist at the International Monetary Fund.

The degree to which modern macroeconomics has “tamed” the business cycle in the post-World War II period can be seen in the chart below, which shows the annual percentage change in real GDP over the course of almost half a century:


Source of chart: Bureau of Economic Analysis of the Department of Commerce.

Rogoff is right that even the worst decline in GDP forecast for this year does not compare with the deep downturns and sharp upturns recorded in the past. But let me quickly add that the combination of problems now before the economy are in some sense unprecedented in the post-war period, so a return to much more volatile growth of the past cannot be ruled out.

I, for one, unfortunately, am less hopeful than Professor Rogoff that the state will reduce its role once the current recession is over.]