Paul Krugman Finally Admits The Obvious, "We are now, I fear, in the early stages of a third depres

Nobel Prize winning economist and New York Times columnist Paul Krugman has issued perhaps the most frightening prediction for the future of the global economy.

In his column today, Krugman worries that a move toward austerity by world governments -- near-term budget-slashing to curb deficits -- will plunge the economy into a "third depression." On the heels of last week's G20 meeting in Toronto, where world governments pledged to halve deficits by 2013, Krugman is deeply concerned that there just won't be enough stimulus in the economy to recover from the prolonged downturn.

Here's Krugman:
"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."


Krugman isn't alone in his fear that the world economy is becoming increasingly precarious. The Wall Street Journal noted that members of the Federal Reserve are in private planning for the possibility of a double-dip recession in America -- a concern shared by MarketWatch's in-house economist.

Krugman goes on to say, "The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing."

And calls this a "victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

Source:www.huffingtonpost.com...

Full article:www.nytimes.com...

I was holding out on panicking till Krugman got alarmed.......


AAAAAAAAAAAAAAGH!



[edit on 28-6-2010 by 12GaugePermissionSlip]

He's about 20 months behind on this news.

I still get a crack up when thinking back to this supposedly really smart guy who said back at the end of '08 that this would be over with in less than 6 months. I couldn't help but laugh right in his face at that one. You're smart if you follow msm, and either brilliant or an idiot if you think for yourself. Meh.

reply to post by 12GaugePermissionSlip


Krugman is wrong more often than he's right. He's a simplistic fool who is a self proclaimed socialist. Paul Krugman hates the free market. He hates capitalism.

When the TARP was initiated, it was not big enough - yet not all of the money was even spent

When the stimulus was created it, too was not big enough, but he predicted that it would slow and reverse rising unemployment. The deficit impact on the spending was suggested to be neutral, due to an increase in tax receipts. I'm thinking he got that wrong.

The "Nobel Prize" business is a non-starter as well. He received his Nobel prize for an econometric study of the swings in economic development as related to demographic shifts in population. Has nothing to do with monetary or fiscal policy, yet he is touted as a "Nobel Prize winning economist". Sure its true, but about as relevant as winning the Nobel prise for literature based on the topics he opines on.

this guy and mostly every one is so far behind, I knew the economy was in trouble way before any of this crap happened.. also the webbots predicted this stuff way ahead of time also .. I watch it unfold in 2008 just as they predicted by the bots, even down to the day that it went really bad, all the markets crashed banks blew up ect..

And yeah were headed for a nice big fall yet again.. the writing is all over the wall, just open your eyes and look around..

Its going to get really hard and heavy shortly , with 1million people loosing the unemployment benefits soon.. thats allot of people not spending money at businesses and defaulting on loans etc.. on top of this all the lack of tourism and business impact in gulf regions ect.. this going to get pretty ugly, pretty quickly.

Crack a beer and enjoy the show.. its going to be a good one !

reply to post by 12GaugePermissionSlip


He's right.. we were in a very, very rare Deflationary spiral.. to get out of the Spiral, the Governments spent quite literally everything they could.. we only briefly escaped it, as the blackhole of debt destroyed the consumers monetary base.. now we will begin seeing signs of an ever strengthening Deflationary Spiral, and this time the Government will not be able to "stimulus" our way out of it, short of destroying the currency in a purge to artificially Inflate the consumer base. Which, if this would occur, theoretically, could stabalize the economy if done at the perfect proportion.. to little or to much and the entire system implodes. IMO they miscalculated the stimulus and the areas it was intended.. to much to fast wasted on pointless projects that didn't produce wealth zapped the economies chances to see a resurgence of the Consumer. Instead money increased as did capital, but the actual Consumer (ie, us the people) saw a deflationary contraction.

Incredibly rare for that to happen.

The last time that did happen was during the "New Deal" .. The only thing that brought us out of the spiral was the creation of a war time economy, and the killing off of millions of workers world wide, with the dismantling of the strongest economies that would then be rebuilt.

reply to post by Rockpuck


Good timing for the possible Iran war, then?

This idea of a lack of jobs is utter crap, there's always something that needs doing. A little teamwork would go a long way. It's just odd how the economy is seen as this controlling overlord when people are always giving, and getting and always will be. It's independent of any "economy".

Originally posted by unityemissions
reply to post by Rockpuck

 

Good timing for the possible Iran war, then?

I don't think war is going to get us out of this. First off the second world war was funded by war bonds and creating the withholding tax - that's right they didn't even take taxes out of your paycheck till 1943, and even once they did it was a very small percentage compared to today.

People actually could survive on one income back then, and even had some savings. Also the federal government had very little debt.
Basically the debt issued for financing the war, and the technology and experience generated from supplying it, is what jump started our economy.

The situation is just not the same today. First the Federal government's ability to borrow is nearly gone. Second the citizens have very little savings to lend or be taxed on. Third any kind of war with Iran will not require anywhere near the resources of WWII. If it did turn into WWIII by drawing in Russia or China I think nukes would be flying quick, I just don't believe there will ever be a large scale conventional war again.

I guess if nukes did manage to wipe out a large portion of our population that might jump start our economy, I really hope that is not the plan.

Originally posted by Rockpuck
reply to post by 12GaugePermissionSlip

 

He's right.. we were in a very, very rare Deflationary spiral.. to get out of the Spiral, the Governments spent quite literally everything they could.. we only briefly escaped it, as the blackhole of debt destroyed the consumers monetary base.. now we will begin seeing signs of an ever strengthening Deflationary Spiral, and this time the Government will not be able to "stimulus" our way out of it, short of destroying the currency in a purge to artificially Inflate the consumer base. Which, if this would occur, theoretically, could stabalize the economy if done at the perfect proportion.. to little or to much and the entire system implodes. IMO they miscalculated the stimulus and the areas it was intended.. to much to fast wasted on pointless projects that didn't produce wealth zapped the economies chances to see a resurgence of the Consumer. Instead money increased as did capital, but the actual Consumer (ie, us the people) saw a deflationary contraction.

Incredibly rare for that to happen.

The last time that did happen was during the "New Deal" .. The only thing that brought us out of the spiral was the creation of a war time economy, and the killing off of millions of workers world wide, with the dismantling of the strongest economies that would then be rebuilt.

Please.....This is what annoys me, there is no debt. None of this crap matters. Debt is just a number, it is not the end of the world. If governments really wanted to save the world it would not be hard to wipe the old :debt: clear and just starting a new one that everyone could pay, it would make no difference the world would go on and they would still get money. This is why I believe there is more to this then just simple debt, that can be fixed, but they dont want it fixed, I honestly think population controll is there main agenda. I see no other point to all of this useless bs they create.

reply to post by unityemissions


No. The Iraq war was evidence enough.. it helped the economy, there's no doubt about it.. It's what ended the recession in 2003. However without the mass expansion of Credit the economy wouldn't have faired so well, and would have crashed again or "double dipped". Since we cannot have another mass expansion of Credit, because the ratio to Credit/Income/Savings is so low, it would have to be completely driven by the war it's self to increase the productivity of the markets..

In other words, a war with Iran is not big enough ... we would need a war at least 10times worse.

reply to post by proximo

First off the second world war was funded by war bonds and creating the withholding tax -

This has nothing to do with Government Debt.. Gov Debt is actually GOOD for recessions, bad for Depressions. By expanding debt to increase the MANUFACTURING, ie, wealth generating, aspects of the economy, it greatly expanded the economy and consumer base..

reply to post by Superman5518

If governments really wanted to save the world it would not be hard to wipe the old :debt: clear and just starting a new one that everyone could pay, it would make no difference the world would go on and they would still get money.

Debt does matter.

And no, a country cannot simply wipe clean debts. It's been tried, and it's proven failure. The more important a country, the less likely it can pull off a stunt like that.. I don't think you know much about economics.

reply to post by 12GaugePermissionSlip

The Japanese took exactly Krugman's advice, went into DE-flation, and are only now strugglig to come out of their "Lost Decade."

Krugman thinks that's just fine. He denies it, but his theories have been tested in the real world by developed economies, AND THEY FAILED SPECTACULARLY.

His Marxist philosophies are the exact opposite of Adam Smith and John Stuart Mill's classical economics.

He and Stiglitz are Obama's two main guiding lights, with Bernanke about to turn on the Fed spigots for "TARP/Stimulus Grande." They want about 4 to 5 times more Fed money poured into the economy!

Obama and Bernanke are going to run the economy even further into the dirt, if you can believe that. It IS possible though.

The President of the Dallas Federal Reserve Bank predicted 5 years ago that this policy would result in NEGATIVE interest rates; that is, YOU pay the government for the right to have money.
(they would stamp your cash with an 'expiration date' and you'd have to exchange it for less before it expired if you hadn't spent it all)

We are at ZERO Fed. interest right now, and even a tiny drop in the economy will result in negative growth.

jw

I think you guy's should be writing the columns for the New York Times.

You bunch of god damn geniuses you !!

There's more common sense in any one financial thread here than I'll ever see in the Wall Street Journal.

Originally posted by E-ville


Its going to get really hard and heavy shortly , with 1million people loosing the unemployment benefits soon.. thats allot of people not spending money at businesses and defaulting on loans etc..

That should kick a few riots off because what have they got to loose so its a good job we have all them vacant FEMA camps.

The end game is the amero and personal carbon taxes

reply to post by jdub297

The Japanese took exactly Krugman's advice, went into DE-flation, and are only now strugglig to come out of their "Lost Decade."

The Japanese never had a "lost decade" .. they had a period of "inventive accounting".

Their exports rose, their quality of life rose, their incomes rose, and their gdp stayed flat. Some would say their economy stagnated, but it was really a ploy to keep their own currency low. They did not "deflate" they "inflated" their currency and consumer base. And while they supposedly ran record debt and had no money, they were for a long time the largest foreign buyer of our debt, and just recently re-overtook China.

We call it a lost decade though because it's bad business to scream trade war with Japan, which we lost the last one we tried.. so we let them have their fun and manipulate their currency to increase the profit of their exports.

You should know not all countries account in the same fashion, and it's very hard to relate two countries that think completely differently, in this case Anglo-accounting compared to Japanese accounting. There is an unofficial standard that most countries use, promoted by the World Bank and IMF, but every country tweeks a little here, a little there.

Obama and Bernanke are going to run the economy even further into the dirt, if you can believe that. It IS possible though.

The Federal Reserve has said they will not monetize another Stimulus Package.. so if they try to promote one, it would have to sell off foreign interest.. the past stimulus were floated by the fed, buying the Tbills and recycling through the Treasury.

reply to post by Rockpuck
Cultural differences aside (Japanese frugality and savings contrasted with American consumerism), a decade of zero growth, minimal lending, banking consolidation (there are only 4 national banks today in Japan), and depressed land values is "lost" economically, even if the macroeconomy struggles on.

Government bailouts of Japanese banks and cash infusions did nothing to help.

Krugman is, and Keynes was, wrong.

Although the Obama administration has artificially helped keep the stock market afloat with Treasury/Fed support of such bailout stocks (soon to include GM) as Citigroup, BofA, Goldman, and Morgan (at least 25% of average daily market market movement is the result of trade in worthless "bailout" recipients), current valuations are inflated and unsustainable.

Federal intervention has completely and perversely distorted market forces.

Future intervention with Bernanke's hoped-for infusion of up to $5 trillion from the Fed will prolong the illusion, but add nothing to the economy.

Even today, banks are sitting on hoards of cash, invested in bonds or traded in derivatives, that will not be loaned to start-ups or struggling companies already burdened in debt.

The only "profits" any have been able to claim have come from drastic reductions in overhead (i.e., employees, inventory, expansion plans) rather than increased sales or production.

Obama, Krugman and Bernanke will crush the life out of capital markets and we will face another "Lost Decade."

But, hey, they will have succeeded in "spreading the wealth," won't they?

[edit to add] There doesn't have to be any "stimulus" bill for the Fed and Treasury to pump out unlimited fiat dollars. As Ben Bernanke boasted a while back, we have a great machine (the Fed) that prints money without any cost, don't we? Who needs another phony "stimulus bill?"

jw

[edit on 30-6-2010 by jdub297]

Originally posted by unityemissions
He's about 20 months behind on this news.

I still get a crack up when thinking back to this supposedly really smart guy who said back at the end of '08 that this would be over with in less than 6 months. I couldn't help but laugh right in his face at that one. You're smart if you follow msm, and either brilliant or an idiot if you think for yourself. Meh.

I remember seeing Krugman on Bloomberg, at around the same time, saying that this would be very similar to Japan's "Lost Decade."

Either one of us is having a false memory, or Krugman is playing the "Make every prediction and then claim you were right" strategy.

On a tangential note, I believe that Rockpuck may be correct about Japan and their "Lost Decade." Anybody else ever have a look at their unemployment rate during that period? It just doesn't add up.

I disagree with the "War is good the for the economy" premise, however. It seems like the "Broken Window" fallacy, on a huge scale. It also seems to contradict Hayek's refutation of Socialism, and the government's inability to have enough information to do much of anything right. And, for what neo-Classical (non-Austrian) economic research is worth, I've yet to see a methodologically sound study that found the defense spending multiplier to be >=1. But plenty of crap studies find that all sorts of government-spending multipliers are >=1.

The post-War economists didn't connect the dots and figure out that the transistor was invented in 1947, and the semiconductor revolution took place for the next several decades.


[edit on 1-7-2010 by theWCH]

reply to post by theWCH


To my very limited understanding on the issue, war merely keeps the machine moving as a last resort. When the war ends, so do all the benefits that came from it as far as a growing economy is concerned. So, it may buy you some time until you can figure out how to create more industry. If that fails, and you lose the war. . that's it. Collapse.

The Federal Reserve has said they will not monetize another Stimulus Package.. so if they try to promote one, it would have to sell off foreign interest.. the past stimulus were floated by the fed, buying the Tbills and recycling through the Treasury.

Would you mind rephrasing the above statement for the folks who are unfamiliar with the language of economics ? " will not MONETIZE ' 'sell off FOREIGN INTEREST ' stimulus were FLOATED by the fed ' Tbills RECYCLED through the Treasury " ?
I have corresponded with the FRB for many years. I would appreciate your understanding of the terminology. Thanks

Originally posted by unityemissions
reply to post by theWCH

 

To my very limited understanding on the issue, war merely keeps the machine moving as a last resort. When the war ends, so do all the benefits that came from it as far as a growing economy is concerned. So, it may buy you some time until you can figure out how to create more industry. If that fails, and you lose the war. . that's it. Collapse.

Actually a world war is best for the economy after it is over. That is for the winners. One of The reasons for the USA’s great economic growth over the past fifty years is the fact that after the war the US was one of the only country’s left with its industry still intact. So as the saying goes “to the victor go the spoils” in this case the spoils of the war were the rebuilding of the world and all the company profit and jobs that came with it.