Paul Krugman:A Slow-Mo Meltdown

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http://www.nytimes.com/2008/08/04/opinion/04krugman.html?ref=opinion

A year ago, as the outlines of the current financial crisis were just becoming clear, I suggested that this crisis, unlike a superficially similar crisis in 1998, wouldn’t end quickly.

It hasn’t.

The good news, I guess, is that we’ve been experiencing a sort of slow-motion meltdown, lacking in dramatic Black Fridays and such. The gradual way the crisis has unfolded has led to an angels-on-the-head-of-a-pin debate among economists about whether what we’re suffering really deserves to be called a recession.

Yet even a slo-mo crisis can do a lot of damage if it goes on for a year and counting.

Home prices are down about 16 percent over the past year, and show no sign of stabilizing. The pain from this bust is widely spread: there are millions of American families who didn’t buy mortgage-backed securities and haven’t lost their houses, but have nonetheless been impoverished by the destruction of much or all of their home equity.