This paper contends that the crash of 2008 caused the Great Recession. It gives proof of a high connection between the stock market and the unemployment rate.
It also provides evidence that Federal Reserve actions will not reestablish full employment, and the overall economy is dependent on wealth, not income.
The S&P 500 has experienced a 20% decline thirteen times over the past 93 years. In only two of those times did the American economy not fall into recession ('87,'66).
JPMorgan recently noted that the markets have priced in an 80% likelihood of a recession. During recessions since the 1930s, the S&P 500 has, on average, posted a 32% decline. Today, 2,302 is the level at which the S&P will be down 32%.
The attached paper provides evidence that the crash in stocks caused The Great Recession. The Stock Market Crash of 2008 Caused the Great Recession: Theory and Evidence.
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