Ken Rogoff says

CAMBRIDGE – Why is everyone still referring to the recent financial crisis as the “Great Recession”? The term, after all, is predicated on a dangerous misdiagnosis of the problems that confront the United States and other countries, leading to bad forecasts and bad policy.

[ . . .]

Why argue about semantics? Well, imagine you have pneumonia, but you think it is only a bad cold. You could easily fail to take the right medicine, and you would certainly expect your life to return to normal much faster than is realistic.

In a conventional recession, the resumption of growth implies a reasonably brisk return to normalcy. The economy not only regains its lost ground, but, within a year, it typically catches up to its rising long-run trend.

Its still not clear to me that semantics are important here. Though people like to put labels on things and then get really exercised over those labels for reasons that I have never completely understood.

Nonetheless, I think his diagnosis is largely correct and, of course, I endorse the treatment.

In my December 2008 column, I argued that the only practical way to shorten the coming period of painful deleveraging and slow growth would be a sustained burst of moderate inflation, say, 4-6% for several years. Of course, inflation is an unfair and arbitrary transfer of income from savers to debtors. But, at the end of the day, such a transfer is the most direct approach to faster recovery. Eventually, it will take place one way or another, anyway, as Europe is painfully learning.

I would extend this by saying fairness is not and should not be the concern of the macroeconomic authorities.

When inflation was tamed in the 1980s and early 90s it represented an enormous wealth transfer from debtors to creditors, put strong downward pressure on wages and created Wall Street fortunes, some of which have lasted to this day.

This was not particularly fair, but it was the inevitable side effect of a policy to bring growth and stability to the US economy. The opposite policy is now needed. It too will not be “fair” but we are not in the fairness business, we are in the macroeconomic growth and stability business.