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Paul Krugman Throws In Towel, Says We're Headed For Another Depression
Posted Jun 28, 2010 11:27am EDT by Henry Blodget in Recession
For the last several months, Princeton professor Paul Krugman has become increasingly agitated about what he feels is a disastrous mistake in the making[/url] -- a sudden global obsession with "austerity" that will lead to spending cuts in many nations in Europe and, possibly, the United States.
Krugman believes that this is exactly the same mistake we made in 1937, when the country was beginning to emerge from the Great Depression. A sudden focus on austerity in 1937, it is widely believed, halted four years of strong growth and plunged the country back into recession, sending the unemployment rate soaring again.
In Krugman's view, the world should keep spending now, to offset the pain of the recession and high unemployment--and then start cutting back as soon as the economy is robustly healthy again.
Those concerned about the world's massive debt and deficits, however, have seized control of the public debate, and are scaring the world's governments into cutting back.
Which fate is worse? It depends on your time frame.
Cutting back on spending now would almost certainly make the economy worse, at least for the short run. Not cutting back on spending later, meanwhile (and Congress has shown no ability to curtail spending), will almost certainly keep us on a road to hell in a handbasket.
The White House's own budget projections show the deficit improving as a percent of GDP to about -4% by 2013[/url]. After that, however, even the White House doesn't think things will get much better. After a few years of bumping along at about -4%, the deficit will begin to soar at . And thanks to the ballooning costs of Medicare, Medicaid, and Social Security--along with inflating interest payments from all the debt we're accumulating--the White House expects the deficit to soar to a staggering -62% of GDP by 2085
What Krugman and his foe agree on is that that's no way to run a country. And it's time we finally faced up to that.
In the meantime, we'll continue to fight about what to do in the near-term. And Krugman thinks he has lost that war and we're headed for another Depression
Hmmm... could you try again and post a link that works? I also wonder if it would be too much to ask why you think Krugman is wrong and what your qualifications for determining same are?
i disagree with mr krugeman and his stance on government spending. it didnt work in the 1930's, the lowest the unemployment rate got was just above 13%, and we ran up huge debts. we did get a pretty good infrastructure from that spending because FDR was willing to spend on such projects, but the reality was that we did not get out of the great depression until WW ll ended, and truman lowered taxes.
government has never, and will never deficit spend a country out of a recession. it just cannot be done. we tried it in the 1930's, it failed. japan tried it in the 1990's, it failed. europe has tried it time and time again, and each time it has failed. right now we are in the process of monetizing our debt, and when that happens, we are looking straight down the barrel of hyper-inflation, just like zimbabwe and the weimar republic. those countries had inflation rates of 500+% per day. we cannot have that happen here otherwise our economy will be destroyed, along with our AAA credit rating as a country.
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Quote:
Originally Posted by NarlyNel
Paul Krugman Throws In Towel, Says We're Headed For Another Depression
Posted Jun 28, 2010 11:27am EDT by Henry Blodget in Recession
For the last several months, Princeton professor Paul Krugman has become increasingly agitated about what he feels is a disastrous mistake in the making[/url] -- a sudden global obsession with "austerity" that will lead to spending cuts in many nations in Europe and, possibly, the United States.
Krugman believes that this is exactly the same mistake we made in 1937, when the country was beginning to emerge from the Great Depression. A sudden focus on austerity in 1937, it is widely believed, halted four years of strong growth and plunged the country back into recession, sending the unemployment rate soaring again.
In Krugman's view, the world should keep spending now, to offset the pain of the recession and high unemployment--and then start cutting back as soon as the economy is robustly healthy again.
Those concerned about the world's massive debt and deficits, however, have seized control of the public debate, and are scaring the world's governments into cutting back.
Which fate is worse? It depends on your time frame.
Cutting back on spending now would almost certainly make the economy worse, at least for the short run. Not cutting back on spending later, meanwhile (and Congress has shown no ability to curtail spending), will almost certainly keep us on a road to hell in a handbasket.
The White House's own budget projections show the deficit improving as a percent of GDP to about -4% by 2013[/url]. After that, however, even the White House doesn't think things will get much better. After a few years of bumping along at about -4%, the deficit will begin to soar at . And thanks to the ballooning costs of Medicare, Medicaid, and Social Security--along with inflating interest payments from all the debt we're accumulating--the White House expects the deficit to soar to a staggering -62% of GDP by 2085
What Krugman and his foe agree on is that that's no way to run a country. And it's time we finally faced up to that.
In the meantime, we'll continue to fight about what to do in the near-term. And Krugman thinks he has lost that war and we're headed for another Depression
You have to remember that the history and mindset of Europe and the USA are different. The USA remembers the Great Depression. It is in our history and part of the American way of thinking. And it scares the HELL out of us to even think about it happening again.
Europe on the other hand remembers the Great Inflation of the 1920s and 30s when people had to take buckets of almost worthless German money to buy even a loaf of bread. It is in their history and part of their thinking. And it scares the HELL out of them. That is why they are more deficit hawks than we are.
Too bad for him that Obama can't control the world and force these countries into "spending into oblivion". I guess we'll be the only idiots marching down the path to insolvency when the rest of the world makes their painful, yet necessary cuts in spending. We'll see who's left standing financially at the end of the day.
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i disagree with mr krugeman and his stance on government spending. it didnt work in the 1930's, the lowest the unemployment rate got was just above 13%, and we ran up huge debts. we did get a pretty good infrastructure from that spending because FDR was willing to spend on such projects, but the reality was that we did not get out of the great depression until WW ll ended, and truman lowered taxes. 
