Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.Krugman's right that the G-20 deficit hawks have won, pledging to halve their deficits in just 3 years and balance their budgets in six. The spending cuts that will be needed to do that will almost certainly break our consumer-driven economy, crash what's left of our real estate market, and render untold millions destitute as ten percent unemployment becomes the fondly remembered "good times."
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
The mindset not that "a rising tide lifts all boats" but "we must suffer badly now or suffer even worse later" is taking over, and it's just as incorrect as Bush's rising tides idiocy was. We now have the greatest wealth imbalance in this country ever, and it's about to get much, much worse.
We're on a one-way bullet train back to the Gilded Age, folks. Odds are you're not gilded. The headline at CNBC this morning? "Futures Rise As Obama Looks To Austerity".
Gonna get ugly, folks.
I'm sure these countries got together without first consulting anyone and decided arbitrarily because it sounded nice to cut deficits regardless of impact.
ReplyDeleteActually...
In the communiqué, the G20 leaders gave each other plenty of leeway in meeting the deficit reduction targets and warned that too drastic cuts could spark another global economic meltdown similar to last year's crisis.
So they do have leeway so they don't cripple themselves in attempting to attain this goal.
We now have the greatest wealth imbalance in this country ever, and it's about to get much, much worse.
Spoken like a true progressive. So it's time to go all Robin Hood and take from the rich and give to the poor?
In many societies, attempts have been made, through property redistribution, taxation or regulation, to redistribute wealth and diminish extreme inequality.
"From each according to his ability, to each according to his need"
Sounds good right?
"While the ideas of communism have throughout history enjoyed occasional popularity, they have seldom if ever worked in practice"
I saw a bumper sticker yesterday, laughed a bit but thought it was over the top. Maybe they were on to something.