Paul Krugman is a Nobel prize wining economist who teaches at Princeton University, and also a columnist for the New York Times.
A few days ago in his newspaper column he said:
“The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.”
These are pretty strong words. In fact for a Nobel prize winning economist to even dare openly to utter the words “second Great Depression” is amazing and more than a little frightening.
Economists thought that another great depression was no longer even possible. The Federal Reserve has been doing all the right things. They have not been at all timid. But the American economy, and world wide the economies of all major players, continue in freefall. The policy tools that the Fed has at its command are near the end.
Less than two weeks before the inauguration of President Obama, the Republican politicians in Washington have already begun setting up roadblocks and are getting ready to lead a major revolt against him. Even the Democrats have already started their business as usual bickering. Before the guy is even inaugurated!
Quoting Paul Krugman again: “Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.
So this is our moment of truth. Will we in fact do what’s necessary to prevent Great Depression II?”
On most major issues I am basically an optimist. For example, I really believe that most people are honest and fair. But at this point I’m pretty pessimistic about the worldwide economy. It looks to me like we ain’t seen nothin’ yet. I think that there are some real tough times ahead.
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LINK: http://www.spiegel.de/international/business/0,1518,600382,00.html
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