Do you feel depressed?

If you do, it's not you…

A worried Paul Krugman issues a warning to his readers and the public at large:

We are now, I fear, in the early stages of a third depression [the two past depressions were the "Great Depression" of the 1930s and the "Long Depression" of the late 1800s]. 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 thus believes the actual cause of this potential depression is the political supremacy of fiscal conservative dogma over all efforts to support demand during a time of massive and unemployment, unemployment that may be chronic. In other words, Krugman believes the deficit hawks have defeated the proponents of stimuli in their political battle over economic policy. This, he believes, is a disaster that stands as a precondition for the next global depression.


Chris Hayes and Dean Baker discuss Krugman's take on the current situation:

Last updated on June 29, 2010 at 12:02 pm

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