"..in the midst of a depression" - Krugman

[KeyWester]

"slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating." - Krugman

http://stoweboyd.amplify.com/2010/06/28/paul-krugman-on-the-third-depression/

Personally I think he is an idiot for saying this. The facts are we are slowly coming out of a recession and could have another downturn.

To claim we are in the middle of a depression is absurd. I think Krugman was very vested in the idea that the stimulus would fail, and now he starts the fear mongering to try and steer the recovery towards his views.

Maybe a depression is coming but we are certainly not in the middle of a depression.

Does anyone agree with his statement ? ...and is there any other economist with this view ?

When did the recession turn to a depression ?
Why did Krugman wait to the middle of the depression to actually say we are in one ?

[midnight]

1. Continuing to keep the tarp money out of the tax payers

hands continues to emphasis the bait and switch that occurred once the bankers received these funds. The blocking that continues in programs to remedy homeowners who are in poorly written mortgages or second mortgages is another piece of this problem. Those banking on this disaster philosophy seem to be running the show.


"we are not in a Depression" A quote from someone who has not lost their home, job, and is without any hope insite. This is the highest unemployment since the great depression.

U.S. Experiencing Worst Episode of Prolonged Unemployment Since Great Depression
Adjusting for demographic factors, current labor market downturn steeper than '82-'83 recession.
Washington, D.C. - As the nation contends with a long and sustained labor market recession, a new study from the Center for Economic and Policy Research demonstrates that the current unemployment rate is higher than the conventional measure shows.

"An unemployment rate that has hovered above 9 percent for several months is striking, but the jobs picture is even worse than it looks," said report author and CEPR Economist David Rosnick.

The study, "The Adult Recession: Age-Adjusted Unemployment at Post-War Highs," adjusts the current unemployment rate to account for demographic differences and finds that the unemployment rate has not fallen below 10.8 percent in the last 12 months. During the worst episode of the recession of the 1980s -- the second half of 1982 and the first half of 1983 -- unemployment passed 10 percent for 7 months.

The analysis notes that the population is older today than it was in the 1980s, which has the effect of lowering today's unemployment rate relative to the past. Since they change jobs more frequently and are more likely to move in and out of the labor market, Young people have a higher unemployment rate than older workers. Adjusting for this older workforce shows that the United States is experiencing the weakest labor market since the Great Depression.http://www.commondreams.org/headline/2010/07/02-5

[KeyWester]

4. Riddle me this...

When the country was losing 700,000 jobs a month , and the DOW crashed to 6500 , and manufacturing fell off a cliff , and unemployment was at 10%

Why didn't Krugman say we were in a depression then ?

All those numbers got better and NOW he says we are in a depression ?

Simple logic, thats all.

Claiming that we will always be in a depression until everybody has work is absurd.

[MannyGoldstein]

2. Krugman's been calling it as he sees it all along

And he's been unrelentingly correct. And he's been ignored by policy makers. And here we are, pretty fucked.

Last month, more than half a million Americans became so discouraged at finding a job that they simply gave up. The average length of unemployment now is something like 9 months. What would you call what's going on?

[KeyWester]

5. "And he's been unrelentingly correct."

Really ?

"The stimulus isn't big enough"

[MannyGoldstein]

8. You seem to have missed the last month or two

in your chart. When you update it, you'll see excactly what Krugman's been saying - that the anemic stimulus would help, but not enough.

[DCBob]

3. The last depression, the "great" one, had 30% negative GDP..

Our economy never got near that number and it is now growing, albeit slowly. We are NOT in a depression, no where near it. Krugman knows this but he likes to use hyperbole at times... I guess it helps get him quoted.

[BootinUp]

11. Obviously there are 2 issues that make your post hard

to agree or disagree with.

1) What is the definition of a depression.

2) What is going to happen over the next few years with policy.

Krugman's point is that if stimulus is not continued, we could easily see a repeat of what happened '33 when FDR took budget cutting measures. As you know the economy never recovered fully until after WWII. Krugman believes that similar bad policy choices will result in a "lost decade", and he backs up this argument with quite a bit of analysis that no one seems to be able to discredit directly. The core argument is that interest rates are up against the zero bound and therefore other means to stimulate the economy must continue.

[DCBob]

12. I agree w/ Krugman's basic point but why does he find it necessary to exaggerate to make that point?

Krugman said we are in the "midst of a depression".. we are not. There is no firm definition of a depression but what is happening now is no where near what happened in the 1930's.

[BootinUp]

13. In the same article

he clearly states that it is his prediction (future historians will say) if policy turns wrong. And you seem to be saying a depression that isn't like the "Great" one isn't worth calling a depression. It has been almost 2 years since the collapse, when is it ok to say where are in the midst of something. When is it ok to sound alarm bells to try and affect policy decisions? If he waits any longer it will be too late.

[DCBob]

14. You can call it what you want but its not a depression..

Its not even a recession in the classical sense. I dont know if we have term for what is happening now.

[BootinUp]

16. .

depression: a period during which business, employment, and stock-market values decline severely or remain at a very low level of activity.

I don't see how you can so easily say we are not in one. Employment has stopped bleeding but we have not made any progress toward reducing the unemployment. Stock values are nearly 30% off their peak. Its a global phenomenon. If it were not for the safety nets and stimulus that we have had it would have been a hell of a lot worse.

It certainly was a called a classic recession, started in late '07 IIRC. It has probably ended when things stabilized at their current low level. Officially the end has not been called as far as I know.

[DCBob]

17. We have growth now.. GDP is growing.. GDP does not grow in a depression or a recession..

geez..

[BootinUp]

20. This is where reading the whole article

not included in the OP or OP link is helpful:

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

Link to the whole article

[DCBob]

22. This may be true but requires predicting the future.. technically we are not now in a depression..

Who knows whay may happen in a few years but saying we are in the "misdt of a depression" now is wrong and irresponsible. If enough people say it and believe it, it might become self-fulfilling.

[BootinUp]

24. And if we don't say it, budget stimulus cutting foolhardiness

to save a penny, will turn out badly. If you notice Krugman has been on this message to refute all the austerity now shit that has been pushed for the last month or so.

[DCBob]

27. This graph might help illustrate it better....

I agree things are not good and we need to be sounding some alarms but we need to keep things in perspective and accurate.

[BootinUp]

40. These graphs tell a grimmer story

sorry I think you will have to click the links. I do not have a webserver available to put them on.

http://calculatedriskimages.blogspot.com/2010/07/employment-recessions-aligned-bottom.html

calculated risk blog post on employment with additional charts

http://www.calculatedriskblog.com/2010/07/employment-population-ratio-part-time.html

[DCBob]

41. I am not saying the situation isn't "grim".. I simply saying we are not in a depression..

no where near.. Why is that so hard to understand? Some of you people seem to be praying for it to happen. You may get your wish.. but it has not happened yet.

[BootinUp]

46. My wishes

The Senate continues to extend long term unemployment benefits for their stimulus effect.

A second stimulus bill focused on job creation is approved.

Bush tax cuts for the wealthy are allowed to expire.

We see an improvement in unemployment statistics particulary long term numbers.

As I pointed out many posts ago, Krugman predicts based on his read of current policy directions that in the future this will be seen as a depression by historians. That infers that he does not expect people to agree with him that we currently are in one, it also infers that his prediction can be avoided by good policy to head off a long term problem.

[DCBob]

48. I agree with all that.. except that things will have to get much much worse, horribly worse...

for this to ever be classified as a depression. Ciao.

[BootinUp]

26. If it double dips the starting point will be earlier

so I find your logic a bit off there.

[DCBob]

30. I am not saying we wont have a double dip.. we might, but this is still not a depression.

It drive me crazy when people use hyperbole and exaggerations to make a point... especially people who are in a position of responsibility and influence like Krugman.

[BootinUp]

33. If GDP was the only measure to classify the economy

or if it could be put in a toaster, or wasn't largely boosted by short term stimulus, your measure of how severe this collapse is would be more meaningful. Long term unemployment is scary high, and they are losing benefits by the thousands.

[edhopper]

37. You sure about that?

[DCBob]

47. That does not prove this is a depression... or that we are headed for a depression..

Krugman is saying we are on the downside of that curve.. I dont see any upward movement there.

[edhopper]

55. This is what you said

"GDP does not grow in a depression or a recession.."

The graph shows you are wrong.
Or do you say we were no longer in a depression after 1933?

[DCBob]

56. Yeah, I did not realize they continued to classify the GD as a depression...

even as significant growth resumed. I assume that is because GDP was still very low compared to where it was prior to the downturn. Our situation is different... we were never in a depression, we were in a recession, and we are not that far from where we were and in fact we have nearly made up the difference.



Krugman is saying we are in the "midst of a depression", on our way down to an economic disaster and that just makes no sense.. based on the numbers.

[BootinUp]

57. Do you agree

its the worst economic downturn since the Great Depression. Y/N?

[DCBob]

58. Yes, I totally agree with that.. but there is reason to be somewhat optimistic..

Some of the numbers are going up. The job picture is bleak, obviously. I think we do need another targeted stimulus but I also think we need to look at debt reduction seriously. If we dont get a handle on our massive growing debt that monster will eat us alive.

[BootinUp]

59. Don't Sweat the Debt

This is a video with Brad Delong and Michael Kinsley. If you can't watch it, read DeLong's blog about more stimulus, the CBO long term fiscal report and how the healthcare bill has significantly improved the picture.

Part 1
http://video.nytimes.com/video/2010/07/06/opinion/1247468394334/bloggingheads-don-t-sweat-the-debt.html

Part 2
http://bloggingheads.tv/diavlogs/29180?in=04:26

his blog has a short article on it.
http://delong.typepad.com/sdj/politics/

[DCBob]

60. I hope you and they are right but the numbers are scary..

[BootinUp]

61. you couldn't have watched

the video yet Part II is 21:45 long, lol. You should maybe later, if the subject interests you, its a very good discussion.

[DCBob]

62. I will try later..

thanks for posting.

[KeyWester]

18. Well...

If a recession requires 2 straight quarters of negative GDP growth, then we are not in a recession much less a depression.

"Stock values are nearly 30% off their peak"

The peak of the Bush bubble. We don't want to build a house of cards again just for a good DOW number.

[BootinUp]

23. Until unemployment

starts turning around I would be careful you don't get too heady about the current GDP which was boosted by short term policy.

[Subdivisions]

44. Please explain in detail how we are not currently in a depression. Thanks. n/t

[DCBob]

63. read the posts above..

not much more I can say.

[Subdivisions]

43. Please provide evidence to support your assertion that 'we are NOT in a depression'. Thanks. n/t

[girl gone mad]

6. I think he got it right this time.

"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"

[DCBob]

9. " in the midst of a depression" is not the same as "early stages of a third depression"..

We are not in the "midst of a depression"... and Krugman knows it.

[KeyWester]

15. Yes, he does know it.

He wants the country to experience another big downturn so he can 'be right about the stimulus'

Nothing but fear mongering, and GOP talking points.

Just like most republicans, he knows the truth but won't speak it, we get spin, fear and hype instead. He has jumped the shark and it now trying to un-jump the shark, not gonna happen Paul.

http://www2.pictures.gi.zimbio.com/Bush+Meets+Recipients+2008+Nobel+Awards+7SZv3Fl754al.jpg

[BootinUp]

19. You are out of your gourd.

I have always wanted to post that phrase, thanks for this opportunity.

[KeyWester]

21. Then you agree with Krugman.

We are in the middle of a depression.

yet I am the crazy one ? I would expect if Palin had said this DU would be all over it.

[BootinUp]

25. Unless you stop taking him out of context

or just making shit up about him, how can I give a positive response to a post of yours.

I have no problem with his full article or his many articles and blog posts. I read him multiple times per week. There is a reason he is the number one, go to economist, writing on current issues. He's damn good.

[BootinUp]

28. deleted

[KeyWester]

32. Oh please.

His own words.

"slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating." - Krugman

What was taken out of context ? what did I make up ?

Thats what I thought.:shrug:

[BootinUp]

34. You don't really know what "taken out of context" means,

Do you..?

[BootinUp]

35. example of you, making shit up.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=8709521&mesg_id=8710058

[KeyWester]

36. You have two choices.

Krugman knows we are not in a depression and is lying about it.

Krugman really doesn't know any better and really thinks we are in the middle of a depression.

You pick, I made my choice, he knows better.

[BootinUp]

39. I guess you expect me to take up your strawman.

no thanks, I'm pretty much done and have already made a strong case where necessary.

[BootinUp]

29. In case you question my claim he is number one.

http://www.mediaite.com/power-grid/category/?c=Print+%2F+Online+Columnists

[edhopper]

38. You think he is a Republican?

And are trying to link him to Bush?
Have you read anything of his the last 10 years?

[RoyGBiv]

7. Failing stimulus ...

Krugman is in no sense "vested" in the idea that the stimulus would fail.

Krugman, along with many other economists, believe that the initial stimulus was too small and that we are in dire need of another one. His argument currently is with those who have hopped on the "austerity" bandwagon, modern-day deficit hawks who are in reality being quite hypocritical with their expression of worries about the deficit. He is particularly concerned with European economic powers like England and Germany, both of which have suddenly found religion with regard to deficits in part based on irrational fears driven by sovereign debt problems in places like Greece and Spain.

Almost all Republicans and some Democrats are making the same noises in the US. If their view is to prevail, that combined with the backward facing measures being pushed in Europe promises catastrophic consequences for all of us.

[BootinUp]

10. He's arguing against austerity measures

while the "recovery" is very fragile. Glad someone is doing it.

[Stinky The Clown]

31. Krugman is correct on this score

I find it interesting that because he criticized Obama in the past, he is being discounted on all scores. Sometimes it isn't politics, its policy.

Carry on.

[walldude]

45. Forget it.. this is day two for this poster and this issue...

And the facts are undeniable... Krugman is an idiot and Warren Buffet who is struggling to pay his electric bill and put food on the table is right. :rofl: :rofl:

You have to remember it's not a depression if Warren Buffet and the OP are doing ok. As long as someone isn't struggling there is no depression. Never mind that unemployment is at an all time high, never mind that food banks are seeing a 50% increase in "customers", never mind that homelessness is increasing, never mind that more people are about to lose their unemployment, Warren Buffet is doing well so we are all good.

[BootinUp]

49. How Reagan defined a depression:

"Human tragedy, human misery, the crushing of the human spirit … They do not need defining—they need action."

I think its not a bad definition.

[KeyWester]

52. " Never mind that unemployment is at an all time high, "

During the great depression it was at 25%

Perhaps you would like to edit your post to contain some facts ?

[YvonneCa]

42. Has anyone here read "Conscience of a Liberal" or "Depression...

...Economics", by Paul Krugman?

If you want context to what he is saying/writing, these books would really help. Krugman has long made the case for a LARGE stimulus to PREVENT depression and that it hasn't yet been sufficient to prevent a depression. His worry was that...given too small a stimulus package...we could end up repeating Japan's mistake and taking YEARS to rebound.

I think his words now are still intended to head that off.

[BootinUp]

50. this is correct

no I haven't read the books, I read his columns, articles and blogs though.

[YvonneCa]

66. You might enjoy the books, too. I started...

...reading his books after the meltdown in 2008. I wanted to get a better handle on what was going on. He writes and explains things in a way regular people...even me :)...can understand.

[area51]

51. 22% unemployment, that's a depression.

From an '09 article but no doubt still true.

[DCBob]

67. It was just as bad in 82.. was that a depression too?

http://www.indexmundi.com/united_states/unemployment_rate.html

[cbdo2007]

53. We'll see the second dip when China collapses later this year or next....

but the USA actually is recovering.

[fishwax]

54. he didn't say we're "in the middle of" a depression

He said we're in the midst of it, by which (context makes clear) he means "beset by," rather than in the middle stages of. He says in the third paragraph of his column that his fear is that we are "in the early stages of a third depression."

Krugman didn't want the stimulus to fail--his fear was always that, if it wasn't big enough, it would be difficult to get more. Now he's arguing against those who claim that continued economic struggles means it's all the more important to restrain spending, rather than stimulating a clearly fragile economy.

[KeyWester]

64. Maybe you need a dictionary...

Main Entry: midst
Pronunciation: \ˈmidst, ˈmitst\
Function: noun
Etymology: Middle English middest, alteration of middes, short for amiddes amid
Date: 15th century
1 : the interior or central part or point : middle <in the midst of the forest>
2 : a position of proximity to the members of a group <a traitor in our midst>
3 : the condition of being surrounded or beset <in the midst of his troubles>
4 : a period of time about the middle of a continuing act or condition <in the midst of a meal>


http://www.merriam-webster.com/dictionary/midst

[fishwax]

65. lol -- your quote from the dictionary shows the definition I mentioned

"3 : the condition of being surrounded or beset <in the midst of his troubles>"