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Deciphering the Shape of Economic Recovery

When economists discuss economic recovery, it's often in terms of the alphabet. In the latest installment of his Making Sen$e series, Paul Solman explains what phrases such as "V-shaped recovery" or "U-shaped recession" say about the economic outlook.

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  • PAUL SOLMAN, NewsHour Economics Correspondent:

    For the past year or more, the U.S. and global economies have been in the soup. And increasingly, the shape of a recovery is being framed in terms of the alphabet all over the world.

    The most positive shape is brought to you by the letter V.


    Well, certainly the view that it is going to be a V shape…


    Another form of recovery is described by the letter U.

  • NOURIEL ROUBINI, Chairman, RGE Monitor:

    … a severe U-shape recession…


    Or maybe the U is really an L.

    MICHAEL MUSSA, Peterson Institute for International Economics: Well, the difference between an L and a U is in the eyes of the beholder.


    Or maybe it's the letter W.

  • ROBERT RENNIE, Currency Strategist:

    It feels like we're in a W-shaped recovery.


    Or the shape could be a little more sophisticated.


    What I expect is an inverted square root sign.


    An inverted square root sign? We'll get to that, too, because, in fact, picturing the possible shapes of a recovery may be a helpful way to understand the possibilities. So we visited friend Simon Johnson, former chief economist at the IMF, at his MIT blackboard for a bit of drawing and drawing out.

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