In the graph below I represent the three recessions beginning in 1973Q3, 1979Q3, and 1990Q3, and add in (with the dashed line) how the PBR suggests the recession beginning in 2008Q3 will progress (on the horizontal axis we have the number of quarters after GDP peaked just before the recession, whilst on the vertical axis 100 is the level of GDP just before the recession began). We see the very long but shallow recession of the early 1990s compared to the much deeper but shorter recession of the 1980s, and then the volatile recession of the early 1970s. The PBR suggests that the recession will be shallower than the 1990s and much shorter than any of these three previous recessions. So Darling's story now is that "the worst crisis in 60 years" will issue in the shortest and mildest recession for decades. Do we think he really believes this? But if these growth figures aren't achieved, then the government's debt figures will be much worse than those announced on Monday.
Update: Now with improved version of graphic illustrating both the worst-case and best-case scenarios from the PBR (click on the graphic for an enlarged version).
