The Return of Depression Economics and the Crisis of 2008

Economics has been on a lot of people’s minds recently. Microsoft had a lay-off last week–the first ever that was motivated by external economics. I know two other gun bloggers that also dodged “the axe” in the last couple of months. I’ve had people approach me wanting information on buying guns and bulk food in a similar manner as I did just before Y2K. Federal interest rates are effectively zero. That has never happened before in my lifetime. Another economic indicator that we are in unusual circumstances is the money supply, or as Kevin put it, It’s Official: You May Now Panic. When you look at that graph note that the doubling of the money supply in the last year (yes that difficult to see spike is real, not just an artifact of the graphic) is unprecedented in the last 100 years. I attended a speech (if you want to call it that) by economist Paul Krugman yesterday–the auditorium was packed. The first hundred people or so received a free copy of his new book — The Return of Depression Economics and the Crisis of 2008. It’s so new it is copyright 2009 and had to come directly from the printer. I have a copy in my hands now.


This blog post is mostly to capture my notes from listening to Krugman yesterday. I’m formulating a big blog post in my mind and hope to post it this weekend.


If in italics below it means it was a direct quotes (as best as I could capture).



  • Not as bad as the 30s–yet.

  • It is as bad as the early 80s.

  • This isn’t your fathers recession. This is your grandfathers recession.

  • All of the 1st world is falling at approximately the same rate.

  • The problem with the stimulus bill is that it isn’t big enough.

  • A trillion here and a trillion there and pretty soon you are talking about real money. A twist on Dirksen’s quote which got a laugh.

  • I’m not feeling panicky but uneasy.

  • I thought I was intellectually prepared.

  • It’s a whole lot harder to head off a second great depression than we thought.

  • The trouble with a big tax cut is that they aren’t spent. Tax cuts are a very bad tool for this type of problem. See also this blog post by Krugman.

  • Tax cuts made permanent won’t work because we can’t afford them.

  • We should seize troubled assets, clean them up, and then sell them. Just take the hit. “We” meaning the U.S. government.

  • There are no safe options. He was responding to a comment from someone about the risks of massive government spending–which Krugman is advocating. He is of the opinion that the stimulus package should be twice the size as the one proposed and passed yesterday.

  • The thing I’m most worried about is Kindelberg’s law: When given two options we will pursue both half-heartedly. I must have the spelling wrong on “Kindelberg”. I can’t find any such “law” on the net.

I’ve read the introduction and the first chapter of his new book. He says socialism is dead and it’s obvious to everyone except a few extremists who have their heads in the sand. But in his talk yesterday he said that “universal health care” would be a good thing to spend some of the two trillion in government spending he is proposing. His attitude was that “universal health care” was obviously a good thing. You could tell from his tone and the words he used that it wasn’t even open to debate with him. I have to wonder if maybe he is one of the extremists he was talking about in his book. See also Phil’s post from day before yesterday.

5 thoughts on “The Return of Depression Economics and the Crisis of 2008

  1. Great post, Joe.

    Socialism is dead, eh? Seems to me “universal health care” and nationalizing banks are pretty socialist. Call it what you want.

  2. Actually Joe, if you download the data for the graph, you will see that the money supply actually doubled in the last 5 and a half months. I kid you not. Go look.

  3. And, perfectly in character, the Republicans want another bailout too, but a smaller one. Same basic premises, different thoughts on implementation.

    Wasn’t last Fall’s “bailout” going to save us all from certain doom? Why hasn’t it? For that matter, all the institutions and practices of FDR which are still with us, and many of which have been greatly expanded, were supposed to fix everything. With this sort of performance record, anyone in business, or any business program, would have been terminated long ago.

    I invite everyone to notice the fact that no one in Congress is talking about “enumerated powers”, nor are they talking about holding those in government accountable for the problems they created in the home financing market over the last 30 years, or in the auto industry. Instead, as a “fix” they’re proposing more of the same sort of crap that helped create the problem in the first place.

    Paul Krugman’s premise (that we need the government to spend far more than what’s been proposed) has now been adopted by some Democrats in Congress. Their shtick now is that FDR would have succeeded in quashing the Great Depression if only he’d spent two or three times as much as he did, and much faster. The saying; “if it fails, just do it harder” comes to mind.

    Thank you, Public Education. No one is even considering free market solutions. And who could blame them? Capitalism isn’t taught in public schools, other than teaching kids that it’s bad. What do we expect when most of the students who learn anything at all in public schools are learning that capitalism is bad, and the solutions come from government controls? This is nothing more than the chickens coming home to roost. As long as a socialist government institution controls education, we can look forward to much more of the same.

  4. Krugman is rapidly approaching Peter Jennings status. That’s where you take whatever he says and, unless you know better from your own knowledge, you believe the diametric opposite. Until that belief is confirmed or debunked by a reliable source.

    M

  5. Krugman is a Keynesian economist – a follower of the same theories used by the Feds in the 1930s that turned what should have been a two-year recession into a decade-long depression. More spending of taxpayer dollars by the Feds will not fix the problem.

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