Paul Krugman on Depression Economics

Monday, December 01, 2008

Nobel Prize-winning economist Paul Krugman explains why he says we’ve returned to Depression economics – and that the global economy must change in order to survive. His recently-updated book is The Return of Depression Economics and the Crisis of 2008.


Paul Krugman

Comments [21]

Mary Arnold from NYC, Queens

I want to suggest to Dr. Krugman that part of the stimulus package should be infrastructure enhancements that include improvements that will hold up in an era of climate change.

Also, an in the WPA era, include a percent for art program that employs artists in infrastructure projects. You will leave a legacy, engage the public, and gain better aesthetics.

Dec. 16 2008 10:15 AM
Boris from NJ

I second C.C. Onyemelukwe in his opinion.

Regarding the "structure" of the economy - it relies heavily on global "free" trade - something for which Mr. Krugman got his Nobel Prize.

There is one word that describes the US economy. George Carlin called it bull****. I call it fraud.

Fraud permietes every level of government, academia, corporate world, media, etc. This printing of money, the "experts" who talk about lessons, learned and not learned, outsourcing, free trade, war on terrorism, war on drugs, etc., etc., etc.

FRAUD. You don't need to know anything else.

Dec. 11 2008 03:03 PM
C.C. Onyemelukwe from Westport CT

Dr. Krugman' interview was a succesful docking and diving of questions. Roosevelt did not put enough money into the economy, hence depression continued. What is enough was unanswered. Others as Krugman acknowledged said Roosvelt did not stop the depression because he was not a free marketer.So which one do we take. Volcker stopped the recession because he sharply lowered interest rate. Bernake sharply reduced interest till it is now nearly zero but the recession is instead gaining speed. Krugman said lessons were not learnt from E.Asia, S. Korea, Japan etc. Lessons were not learnt from 1930. Perhaps there is no leasson to be learn except that all conventional economics is junk. (Conventional)economists have refused to acknowledge that economics is money. Money is an unpredictable commodity. The trouble with US economy has to do with the way the economy is organized---its structure. While these economists want to claim that their economics is a science, they have failed to evolve and learn the science of economics which shows that US has a structurally unbalanced economy.

Dec. 01 2008 04:55 PM
Micheal from manhattan

Dec. 01 2008 01:42 PM
Micheal from manhattan

I read the article on the FEE site. I suggest that people read Wikipedia entries on the crashes seem to be a frequent part of US history from the 1780's onward, and which in these cases seem to be more caused by greed by the wealthy and the wealthy wannabees than "just normal business cycles" apologists for corporate and big money greed always offer these arguments to distract us from looking at the manipulations of capital they coddle. Please explain away the greed behind the panic of:1819,1825,1837,1857,1873,1893,1901,1907, and on and on. So Liberal economic policies cause economic panic and collapse? How can anyone seriously make that argument. When capitalism fails ... socialism in some form ALLways comes to the rescue.

Dec. 01 2008 01:39 PM
Micheal from manhattan

The reality of Economics right now is that with the rest of the world also needing to "print money " to avoid economic collapse, The dependence of the world on the US consumer market to continue growth, and the preeminent military position of the USA .. the USA can print (within reason and sound policy) as much money as it wants. Things don't have to square up. Budgets at the Macro national superpower level do not have to be balanced. This is not YOUR budget. Its childish to think of an economy in terms of a household. Deficits can be pushed forward into more prosperous and hopefully more productive times.
We have a surplus in clothing , food, entertainment and shelter. The only real cost of EVERYThing is labor.

Dec. 01 2008 01:23 PM
Robert from NYC

Interestingly as you speak, CNN's Breaking News headline on their web site at this moment reads...
"The U.S. entered a recession in December 2007, according to the National"- Bureau of Economic Research

And I in all my ignorance am convinced that we are already in a depression

Dec. 01 2008 12:40 PM
Curious from Montvale, NJ

Conspicuous by his absence -- has Dr. Krugman been approached by the Obama transition team??

Dec. 01 2008 12:37 PM
Elizabeth from Monmouth County NJ

Leonard, please ask Mr. Krugman about the rampant paranoia about our currency becoming worthless due to all this borrowing -- thank you!

Dec. 01 2008 12:35 PM
Chris Garvey from Amityville

A much better analysis of the depression is at
On Hoover:
"The Revenue Act of 1932 doubled the income tax, the sharpest increase in the Federal tax burden in American history. Corporation tax rates were boosted from 12 per cent to 133/4 and 141/2 per cent. Estate taxes were raised. Gift taxes were imposed with rates from 3/4 to 331/2 per cent. A 1¢ gasoline tax was imposed, a 3 per cent automobile tax, a telegraph and telephone tax, a 2¢ check tax, and many other excise taxes. And finally, postal rates were increased substantially.
When state and local governments faced shrinking revenues, they, too, joined the Federal government in imposing new levies.
... the fiscal burden of Federal, state, and local governments nearly doubled during the period, rising from 16 per cent of net private product to 29 per cent. This blow, alone, would bring any economy to its knees, and shatters the silly contention that the Great Depression was a consequence of economic freedom."
Roosevelt's contribution was worse.
See the above link for more detail.

Dec. 01 2008 12:35 PM
Sally Robinson from Brooklyn

Do you think that if the government had let these large financial institutions fold without bailing them out that this would have served as a purging of badly managed corporations, which, although painful for the economy in the short-term, would have strengthened it in the long-term?

Dec. 01 2008 12:35 PM

IN 97-99 the countries that ducked the crisis the best -- take Vietnam -- were those w the least transparent markets, those w the highest walls to free markets. They were protected. Is that a lesson here too?

Dec. 01 2008 12:33 PM
AG from BK

How do you possibly justify Bernake or the Fed while talking about transparency? Sure makes sense. Ha!!! For someone who was an expert on the depression, Bernake sure knows a thing or two about propping up failed system via price fixing. I guess he wants more Hoovervilles. Many economists like Peter Schiff predicted this mess, but no one listened. We need transparency not more of the same regulation that actually destroys small businesses.

Dec. 01 2008 12:33 PM
Dom from NJ

Can anyone (e.g., Mr. Krugman) answer the very political question about "supply Side" or trickle down economics. Does cutting taxes really increase revenue? If so, why - if not why not?

Dec. 01 2008 12:27 PM


Dec. 01 2008 12:27 PM
dbryan from brooklyn

it seems to me consumption per se us not the problem. the problem is leverage. the govt does not simply encourage home ownership; it encourages home ownership via leverage only. there are no tax benefits if you own your home outright. shouldnt tax policy be changed to discourage leverage?

Dec. 01 2008 12:26 PM

is there a limit to how much borrowing the federal government can do?

if so, what are the limiting factors, and how does that affect the prospects for a major stimulus plan?

Dec. 01 2008 12:24 PM

WII also significantly (and disturbingly, of course)reduced the population.

Is this factored into the economic analysis of the rise out of the Depression?

And is this noted as a significant difference from the current crisis?

Dec. 01 2008 12:21 PM
Robert from NYC

But do you think "we" (they) won't forget these failures again in future and again deregulate? We go on and on and on causing the same failures. There is no such thing as "learning our lessons" "we" (they) just don't care. It's arrogance and greed all over again just like de ja vu!!

Dec. 01 2008 12:15 PM
LeeNYC from Manhattan

I was wondering what Dr. Krugman thinks about the lack of transparency in the Treasury's bailout of the banks. Does he feel that this is helpful or counterproductive as regards our economic recovery?

Thank you.

Dec. 01 2008 12:10 PM
Bruce from Highland Park, NJ

In the last few weeks, commentator George will has been claiming on abc's This Week that FDR's New Deal caused investment to be negative in the 30's and caused the collapse of industrial output. I saw Prof. Krugman's response, but I hope he will expand on it. I'd like to know if Will's claims are a matter of serious debate, if any prominent economists agree with him, and the answering argument in favor of FDR.

Dec. 01 2008 10:57 AM

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