Paul Krugman: The Lesser Depression
I've seen people complain a lot lately that Krugman is too grim, too depressing in his accurate estimations of our economic landscape. Seriously. People are complaining that one of the few pundits who isn't actively lying to them should try and sugarcoat his fact-dropping more so he isn't so scary.
I think we need more scary. People need to understand the real consequences of their actions, and not the Think Tank-softened versions that air on NPR and the nightly news.
The Lesser Depression - NYTimes.com
But here’s the thing: Even if we manage to avoid immediate catastrophe, the deals being struck on both sides of the Atlantic are almost guaranteed to make the broader economic slump worse.
In fact, policy makers seem determined to perpetuate what I’ve taken to calling the Lesser Depression, the prolonged era of high unemployment that began with the Great Recession of 2007-2009 and continues to this day, more than two years after the recession supposedly ended.
Let’s talk for a moment about why our economies are (still) so depressed.
The great housing bubble of the last decade, which was both an American and a European phenomenon, was accompanied by a huge rise in household debt. When the bubble burst, home construction plunged, and so did consumer spending as debt-burdened families cut back.
Everything might still have been O.K. if other major economic players had stepped up their spending, filling the gap left by the housing plunge and the consumer pullback. But nobody did. In particular, cash-rich corporations see no reason to invest that cash in the face of weak consumer demand.
