The Financial Crisis Cost Every American $70,000, San Francisco Fed Study Says

The financial crisis permanently damaged the U.S. economy, costing around $70,000 in lost income for every American.

Ten years after the financial crisis peaked in 2008, the U.S. economy remains significantly smaller than it should be based on its pre-crisis growth trend, according to a study published Monday by the Federal Reserve Bank of San Francisco.

“One possible reason lies in the large losses in the economy’s productive capacity following the financial crisis,” Fed economists Regis Barnichon, Christian Matthes, and Alexander Ziegenbein write. “The size of those losses suggests that the level of output is unlikely to revert to its pre-crisis trend level. This represents a lifetime present-value income loss of about $70,000 for every American.”

The economists find that the economy is 12 percentage points smaller than it would have been with the crisis and subsequent recession.

“This is a large number: In dollar terms, it represents a lifetime income loss in present-discounted value terms of about $70,000 for every American,” the economists write.

Why did the crisis have such a deep and lasting effect? The economists say they still do not know.

“We do not yet have a good grasp on the mechanisms through which financial market disruptions can have such persistent effects on output,” they write.

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