Krugman: Averting the Worst

[ProSense]

Averting the Worst

By PAUL KRUGMAN
Published: August 9, 2009

So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you take into account the need to find employment for a growing working-age population, we’re probably around nine million jobs short of where we should be.

And the job market still hasn’t turned around — that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven’t yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.

For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.

A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators — world trade, world industrial production, even stock prices — were falling as fast as or faster than they did in 1929-30.

But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.

So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

<...>

All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.

And aren’t you glad that right now the government is being run by people who don’t hate government?

more

Yes. We. Are.

[BlooInBloo]

1. With the hate-America opposition, it'll likely be baby-steps recovery...

And quite awhile before the results are felt and acknowledged across the board.

Gotta start somewhere, though.

[Eric J in MN]

2. Obama embraced Bush's economic policies. He voted for the $700 billion bailout...

...and appointed Timothy Geithner.

If Bush were in office for another year, the policies since January would have been mostly the same.

We would have had a mild recession if the people running the government for the past year had done a good job.

[ProSense]

4. You're right.

Bush saved us.



Idiocy.

[Eric J in MN]

5. No one saved us. Recessions are part of a cycle, and the fact that this recession...

...is especially bad means that supporters of the bank bailout shoudl be criticized, not praised.

[ProSense]

6. Right, everyone was screaming

that Obama's plans weren't going to work or wouldn't work fast enough because things were going to work themselves out faster any way.

Good grief.

:rofl:

[nadinbrzezinski]

7. Some folks really need to read on John Maynard Keynes

:-)

And perhaps even listen to Krugman, if they do not want to read Keynes.

Hell, to a point even bush found Keynes, or rather his advisers did. I know that george could not find his ass with his two hands, even if he tried.

[Larkspur]

8. That's little comfort to the millions of unemployed whose unemployment compensation

has either run out or is about to.

Obama still has a way to go and blowing up more bubbles to help the economy, which is what Geithner and Summers are doing, only delays the next depression. Obama still has not begun the hard work of reorganizing our economy, which is still dominated by Wall Street's greed.

[ProSense]

10. Do you think it's any comfort to the people who didn't lose their jobs?

Congress is considering extending unemployment benefits.

[Larkspur]

14. They at least have jobs

I was laid off last year and a couple of weeks ago I was called back to work by the end users of the environment I use to support. The H-1B visa contractor who took over my duties screwed up the environment. It wasn't completely his fault. Systems management dumped my duties on him and I had only 2 days to teach him what I had been doing for 10 years. I'm back on a 3 month contract, not as full time employee, but the manager who hired me told me Thursday that he's already working on extending my contract to the end of the year and he is trying to get me my full time job back, but can't guarentee it.

Until I got called back, my job prospects were very bleak. No one was hiring and being 47 years old was becoming a liability too. No one wanted experienced computer programmers. I didn't really know what I was going to do. I got lucky, but millions of others aren't so lucky.

[FrenchieCat]

9. Yuk....You sound like a Republican, cause they are saying that too.....

that if everything would have been left to the private sector,
we would be alright.

Bullshit.

[Eric J in MN]

11. I'm saying the federal government should have taken completely different action.

Cramdown - let bankruptcy judges re-write mortgages for primary houses. (They already can for vacation houses.)

Free health care - which would take the burden off businesses, besides the more direct benefit of more people getting health care.

Direct consumer lending by the federal government - instead of handing trillions to private banks and hoping that they lend more to consumers than without that money, the federal government could have made direct loans to consumers in exactly the amount it judged necessary.

[FrenchieCat]

13. We have stepped away from the abyss,

and even Krugman ain't talking about what we should have done instead at this point.

As for your solutions,
Halfway thought-out Fantasies aren't considered solutions.

[Eric J in MN]

16. Cramdown was included in the original version of the $700 billion bank bailout bill,

...from Senator Chris Dodd (D-CT).

But cramdown wasn't in the final bill.

President Obama is nominally in favor of cramdown, but hasn't pushed for it.

President Obama also wants the federal government to make direct student loans.

So cramdown and direct consumer loans aren't just a fantasy, but things the president supports to some extent, which haven't been put into practice.

[girl gone mad]

19. Maybe Reagan saved us.

Why not, since this administration seems to believe in the same trickle down bullshit and you and others are saying that we have achieved a recovery based on the trickle down policies and an inflated stock market.

[ProSense]

21. Hey, to each his/her own. n/t

[babylonsister]

15. Huh? No way. You have a lot of faith in idiot son. I had none. nt

[Eric J in MN]

18. I wasn't praising Bush. I was criticizing Obama...

...for voting as a senator for Bush's proposal to give banks $700 billion, and as president otherwise handing money to banks as Bush probably would have.

[nadinbrzezinski]

3. We have stepped away from the abyss

things will take time still to turn around where people will notice... but we have stepped away from the abyss. I for one am happy about that... as I will take a bad recession, and this is a real bad one, over a great depression any day, and twice on Sunday.

[theflyer03]

12. more than likely...

those who don't believe this now will never learn it no matter what evidence is presented to the contrary.
This is how they are; really stupid.
Tks Mr. Krugman.
I hope it's a long, long time before they get gain the public trust again. (Preferably never.)

"Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.
And aren’t you glad that right now the government is being run by people who don’t hate government?"

[Barack_America]

17. When did you convert to "pro-Krugman"?

Just out of curiosity.

[grantcart]

20. when did Krugman convert to pro-Obama?

From the start he said that the stimulus was doomed to failure because it contained too many political compromises and was too small.


This, despite the fact, that Obama is the one that has to sell it to the bond markets and to get it through the legislature.


Krugman was used to pillory Obama on a daily basis for being way to mimimalist, now it appears to be basically the right approach with some fine tuning always available - the argument he condescendingly dismissed 6 months ago.


Interesting that some of those who used to give us multiple threads a day on Krugman are no longer posting here.

[Barack_America]

22. That I don't think will last.

Krugman being pro-Obama, that is.