The Economy: Four Lessons From 2011 for 2012

In many ways, this was a year to forget -- but we'd making a mistake not to learn from the past.

Though 2011 is ending on a positive note with stronger growth and lower unemployment, it was a tough year. The economy barely grew for most of it, at a point in past recoveries when growth is usually surging, and that wasn't the only surprise. As we look forward to 2012, here are four things we learned in the last year that inform our view of what's ahead for the economy.

1. In extraordinary times, dependable rules about the economy sometimes don't apply. Since the 1930s, other recessions and recoveries have been roughly symmetrical. The deep recessions in the 1950s, 1970s and 1980s were followed by strong recoveries, and mild recessions in the 1990s and 2001 yielded to modest growth. But this time, the geometry hasn't followed the rule. The explanation is that the Great Recession was driven by a serious financial crisis -- America's first in 80 years. In other countries, where such crises have been more frequent, the related deep recessions are followed by economic weakness that lasts for five to seven years, according to economists Kenneth Rogoff and Carmen Reinhart.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

John Maggs
Senior Economics Editor, The Kiplinger Letter