Franchise Update Magazine Issue II, 2011 | Page 46

Grow Market Lead

Market
trends
By Darrell Johnson

Competition for Credit
Who gets capital now—and how?

L

ooking back over hundreds of
years of economic downturns
caused by financial crises reveals a fairly distinct pattern:
on average, public debt nearly doubled
within three years; unemployment rose
an average of 7 percent above pre-downturn levels and took about five years to
return to more normal levels; business
and consumer deleveraging began within
two years after the crisis and lasted six to
seven years; and when public debt rose
above 90 percent of GDP, the GDP
growth rate for subsequent years was
reduced by at least 1 percent.
How does the current economic downturn compare? Unemployment at about
9 percent is only 4 to 5 percent above
pre-crash levels. Since we are in the
second year of the recovery and unemployment hasn’t decreased significantly,
it does appear we are headed toward a
lo