When an economist has just released a book covering eight centuries of financial crises, you shouldn't expect her to talk about looking on the bright side of things.
At Friday's Philadelphia Fed Policy Forum, Carmen M. Reinhart brought the cold statistics to document how bad the current crisis is, and she had an admonishment.
"Complacency has been a killer in this crisis," she told those assembled.
That's right, complacency. The average American still suffers from sticker shock from billion-dollar bailouts of banks, an insurer and two car companies, and more than a trillion dollars of government bond purchases. But the complacency that Reinhart, a University of Maryland economics professor, was talking about involves something policymakers still can't agree on:
What to do with the trillions of dollars of toxic assets sitting on bank balance sheets?
During the fall of 2008, Congress did indeed pass the Troubled Asset Relief Program at the urging of the Treasury Department under the urging of Secretary Henry Paulson. But the idea of using federal funds to buy up toxic assets quickly gave way to boosting capital at U.S. banks, both sick and healthy. That was seen as the more doable strategy. After all, it was impossible to put a value on the toxic assets, right?
If the United States wants to shorten the duration of the current crisis, then it needs to address those bad assets, she said.
For those who don't think the banks should get any more help, Reinhart had more bad news, historically speaking. Banking crises are often followed by periods of high unemployment.
Research by Reinhart and Harvard economics professor Kenneth Rogoff shows that the average increase in the unemployment rate was 7 percentage points following a major banking crisis.
Given that the unemployment rate for 2007 was 4.6 percent in the United States, a 7 point increase would take it to 11.6 percent. But the rate for November actually declined a bit - to 10.0 percent, the government reported Friday, and economists are a bit more optimistic that the nation may avoid reaching the Reinhart-Rogoff average.
However, those hoping for a return to a 4.6 percent unemployment rate could have a long wait. Again, citing historical averages, Reinhart said the period of elevated unemployment rates lasts 4.8 years on average.
Want more cheery news? "The legacy of financial crises is more government debt," Reinhart said. On average, she found an 86 percent increase in government debt in the three years following a financial crisis.
The theme of the Fed's policy forum was lessons from the economic and financial crisis. But the theme of the Reinhart-Rogoff book is that we don't take those lessons to heart.
They call it this-time-is-different syndrome, meaning a belief that financial crises are things that hit other countries in other times. The U.S. in the first decade of this century believed it was smarter and better than countries that default on their debt. The U.S. isn't close to default, but financial institutions' abuse of leverage wound up sending it into crisis.
"It's part of the recurring nature of why crises continue to occur," she said.
Friday's better than expected news on the job front may mask the many indignities, large and small, of being unemployed.
In my colleague Jane Von Bergen's Wednesday front-page story on unemployment on the Main Line, laid-off marketing manager Ian Slimon talked about how his careful budgeting has precluded him from buying a bottle of wine as he once did to toast the start of a weekend.
Soon after the article appeared, a stranger knocked on Slimon's door in Paoli and offered him a bottle of wine. "Thought you might enjoy this," the stranger said.
The next day, three more bottles appeared, one from an anonymous donor, the other two from neighbors. "Now my wine cellar is restored," Slimon joked.
Of course, what he'd really like is a job. Then there'd be a real reason to raise a toast.