According to a researcher at the Federal Reserve Bank of San Francisco, the 18-month recession has cost over $7,300 per person in foregone consumption as of May 2011 — that’s an average of $175 a month lost by every American since the financial crisis began. With roughly 309 million people in the country, according the 2010 census, that’s about $2.26 trillion. According to the report, that is the “most severe economic contraction since 1947 as measured by the peak-to-trough decline in real GDP.”
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The San Francisco Fed calculated the figure by comparing personal consumption expenditures between December 2007 and May 2011 with those before the crisis. According to senior economist Kevin Lansing, per capita consumption is still down 1.6%. But why such a dramatic decrease in consumption?
The Great Recession triggered a dramatic shift in household spending behavior. Real personal consumption expenditures trended down for six quarters, the personal saving rate more than tripled from around 2% to over 6%, and households began a sustained deleveraging process that is still under way.
Fed officials are currently considering using interest-rate policy to burst asset bubbles as a means of averting future crises like that beginning with the collapse of the subprime-mortgage market over three years ago.