Way back in mid-January, when the Washington policy herd had not yet determined that the economy needed stimulus, The Washington Post ran an editorial in which it held out the prospect that a recession may not be severe. This comment was intended to calm readers and slow the rush to stimulus. (The Post editorial board flipped the following week and joined the rush to stimulus.)

Still, the Post was right. We don’t know how severe this recession will be. My bet is that the loss of $4 trillion to $8 trillion in wealth due to the collapse of the housing bubble will lead to a serious recession. But perhaps the Post's optimism will prove correct; what will the world look like?

My colleague at CEPR, John Schmitt, did some quick calculations to remind people what happens in recessions.

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