Monday, June 28, 2010

The Krugman Long Depression Warning

Paul Krugman is clueless when it comes to economic theory, but I have always argued that he watches the data closely and that he would be among the first to detect the second dip of the double dip recession.

He has detected such. He writes:
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.

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.
From there he launches into government spending prescriptions that will only make the downturn worse.

The man sees whats in front of him (even when few others do), but he has no clue as to how to deal with what's in front of him. It's as if he is one of the few to detect a massive hurricane that is about to hit, but then recommends wearing straw hats as protection. Heed Krugman's warning, ignore his mad spending "solution."


  1. Boy, if this isn't a classic CYA column from Krugman, I don't what is. He's so far down the Keynesian ideology path that he can't see that the policies he champions have made things worse, not better.

  2. Prepare for Cliff-Edge, 'Monster' Money Printing: RBS

  3. The Long Depression did not exists. Its a myth, promoted by some ignorant historians.

    Btw, what Krugman is doing is just gettig ready to say: See, you didnt spend enough and now we are in a depression...

  4. RW it's more like recommending wearing a hat made out of broken bits of glass, with a hurricane coming.