Until there's nothing left to give

Lawrence Summers:

It is certainly fair to say that growth was adequate perhaps even good during the 2003-2007 period. It would not be right to say either that growth was spectacular or that the economy was overheating during this period. And yet this was the time of vast erosion of credit standards, the biggest housing bubble in a century, the emergence of substantial budget deficits and what many criticize as lax monetary and regulatory policies.

"It is certainly fair to say that growth was adequate perhaps even good during the 2003-2007 period."

Good? He's kidding, right?

Graph #1: Percent Change from Year Ago, Industrial Production

Graph #2: Percent Change from Year Ago, Real GDP

Graph #3: Percent Change from Year Ago, Total U.S. Employment

"And yet this was the time of vast erosion of credit standards, the biggest housing bubble in a century, the emergence of substantial budget deficits and what many criticize as lax monetary and regulatory policies."

Well of course. It was very late in a long financial cycle. And just as the graphs show progressive deterioration, finance demands progressively more from the productive economy, until there's nothing left to give.