Krugman's smelly dirty memory hole
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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...
...unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.
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Maximus Wackonomicis can see the writing on the wall, and of course he understands wherein the problem lies:
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In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery.
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Of course...when Keynesianism fails it invariably fails because we didn't spend enough. That $800 billion obviously wasn't the kind of money that was needed all along. had those obstructionist republican types not gotten in the way then
the recovery package would have been more like what Krugman thought was necessary:
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...we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it’s too small...
When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.
That’s twice what the unreliable rumor says. So if there’s any truth to the rumor, my advice to the powers that be (or more accurately will be in a couple of months) is to think hard – you really, really don’t want to lowball this.--November 2008
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Damn shame they didn't follow Krug's advice or we wouldn't be sitting in basically the same situation we were in 18 months ago....hey wait a second....$800 billion is a lot more than the $600 billion, isn't it?
We did follow Krugman's plan--we exceeded the worlds greatest keynesian's estimate of what was necessary, yet here we find ourselves staring at a very long period of japanese style deflationary stagnation with (as Krugman calls it) catastropohic levels of unemployment.
You gotta appreciate the memory-holish irony of this quote:
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...over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy....the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover...
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Krugs busts out the trope "it was Hoover's horrible laissez faire ways that got us into the great depression".
Really?
It's especially interesting how Krugman refers to hard-money and balanced budget type of thinking as "orthodoxy". There is nothing orthodox about hard-money inside the beltway...when was the last time any person of political prominence described Ron Paul as orthodox? As Nixon said, 'we are all Keynesians now.'
Krugs is not a lone voice crying for Keynesian reason in the face of Austrian hegemony and he's delusional to suggest otherwise. The current situation and coming calamity (or extended malaise) are products of neo-keynesian/monetarist orthodoxy and it's the keynesian/monetarist solutions that are failing.