Friday, August 19, 2011

Paul Krugman still plays Cassandra

I wish Krugman hadn't had such a good record on these things over the last few years. Today, he's thinking about Awesome Wrongness in economic policy.

And given his record, this is not good news:

OK, seriously: things are looking really terrible, And crucially, they’re looking terrible in the wrong way, at least if you wanted to believe that political and policy debate over the past year and a half made any sense at all. We’ve been utterly preoccupied with deficits, deficits, deficits; there was supposedly a crisis looming, but a crisis that would take the form of an attack by the bond vigilantes.

And here we are, with markets now deeply worried not by deficits but by stalling growth, fearing not fiscal profligacy but fiscal austerity, and with interest rates at historic lows.

Instead of turning into Greece, we've turned into Japan, except much worse. And policy is replaying 1937.
"Japan" in this case refers to Japan's "lost decade," which has actually been going on for more than a decade now, an extended period of depressed economic activity that involved what economists call a "liquidity trap," in which companies have money to invest, demand is too low to stimulate healthy investment levels, and interest rates are so near zero that manipulating the money supply via monetary policy can have little effect. By "1937," he means the new recession that resulted in 1937 when the Roosevelt Administration decided it was time to start balancing the budget. The resulting austerity policy pushed the still-weak economy into another recession.

Tags:

| +Save/Share | |

Links to this post:

Create a Link




FEATURED QUOTE

"It is the logic of our times
No subject for immortal verse
That we who lived by honest dreams
Defend the bad against the worse."


-- Cecil Day-Lewis from Where Are The War Poets?


ABOUT US

  • What is the Blue Voice?
  • Bruce Miller
  • Fdtate
  • Marcia Ellen (on hiatus)
  • Marigolds2
  • Neil
  • Tankwoman
  • Wonky Muse

  • RECENT POSTS

  • A new Obama jobs program coming?
  • Europe and the US, holding hands and jumping off t...
  • Bachmann and the press: when will the standard scr...
  • Signs of the times: elite illusions
  • Scratching for signs for Democrats to have elector...
  • Juan Cole on Ron Paul
  • A dubious manifestation of "civility" on Michelle ...
  • The New Apostolic Reformation and today's Republic...
  • "Fiat money"? What the ... ?!?
  • Pentagon Propaganda and Hollywood

  • ARCHIVES




    RECENT COMMENTS

    [Tip: Point cursor to any comment to see title of post being discussed.]
    SEARCH THIS SITE
    Google
    www TBV

    BLUE'S NEWS





    ACT BLUE











    BLUE LINKS

    Environmental Links
    Gay/Lesbian Links
    News & Media Links
    Organization Links
    Political Links
    Religious Links
    Watchdog Links

    BLUE ROLL


    MISCELLANEOUS

    Atom/XML Feed
    Blogarama - Blog Directory
    Blogwise - blog directory

    Blogstreet
    Haloscan


    Blogger

    hits since 06-13-2005

    site design: wonky muse
    image: fpsoftlab.com