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In an interview with the British Observer, liberal economist Paul Krugman confronts the possibility that our current economic problems do not lend themselves to a quick fix:
The risk for long stagnation is really high . . .Most people seem to believe that the mess we're in is just an ordinary recession -- a few quarters of bad news, and then we'll be right back on our feet again. The problem with that belief is that the disastrous meltdown of housing values over the past three years is unprecedented in recent American history.
The size of the shock to our systems is going to be much bigger than what happened to Japan in the 1990s. . . .
Not since the crash of 1929 has the U.S. economy sustained such a drastic loss of asset value. Recovering from that kind of catastrophe will not be easy or quick, and fully recovery will only be delayed by the kinds of neo-Keynesian approach being pursued by Pelosi, Reid and Obama.
The Fundamentals Still Suck, and The Worse Is Yet To Come.
UPDATE: How bad is it? Joe Biden admits they "guessed wrong" about the stimulus. Heh.
Stacy:
ReplyDeleteYou forgot to re-link to your "It Won't Work" post.
I gotta love Joe Biden (no actually I hate his guts) when he says "we all guessed wrong". How about that- what were the odds on that happening after they let Nancy Pelosi and company wrote the stimulus package.
The problem is that Krugman either has no idea what caused all this, or else is so politically warped that he will simply never admit it. The day he acknowledges that the Federal Reserve's utilization of fractional reserve banking to create money out of thin air fueled the boom, the bust of which we will be feeling for the next ten years -- at least -- because all Obama will do is try to reinflate it, but with higher taxes, is the day you can agree with Krugman.
ReplyDeleteI guess you missed the last paragraph where Krugman praises Obama. Yeah we've lost a lot of value in the housing market in the last year. (Where did last three years come from? 2007 and 2006 were bubble years) We're going to lose more real estate value over the next two, especially commerical. But seeing as we've lowered interst rates to nothing to no effect monetary policy isn't gonna save us. Government has to spend when consumers and business can't to forestall a horrendous depression. Otherwise you all get to involuntarily go Galt. And starve.
ReplyDelete