The Importance of a Modest Recession

If we compare to 2008 starting with the banks we are in a very different position. On the consumer side what made the 2008 recession so tough was the fact that the households realized they were going to lose their jobs. Today this is quite unlikely on top of it especially in Europe. This kind of labor hoarding process should be limiting quite a lot the potential for layoffs. That is our key assumption why we should have a recession which is moderate in amplitude and limited in time.