|The Return of Depression Economics and the Crisis of 2008
|List Price: $21.95
Our Price: $9.99
You Save: $11.96 (54%)
In 1999, in The Return of Depression Economics, Paul Krugman surveyed the economic crises that had swept across Asia and Latin America, and pointed out that those crises were a warning for all of us: like diseases that have become resistant to antibiotics, the economic maladies that caused the Great Depression were making a comeback. In the years that followed, as Wall Street boomed and financial wheeler-dealers made vast profits, the international crises of the 1990s faded from memory. But now depression economics has come to America: when the great housing bubble of the mid-2000s burst, the U.S. financial system proved as vulnerable as those of developing countries caught up in earlier crises and a replay of the 1930s seems all too possible. In this new, greatly updated edition of The Return of Depression Economics, Krugman shows how the failure of regulation to keep pace with an increasingly out-of-control financial system set the United States, and the world as a whole, up for the greatest financial crisis since the 1930s. He also lays out the steps that must be taken to contain the crisis, and turn around a world economy sliding into a deep recession. Brilliantly crafted in Krugman's trademark style "lucid, lively, and supremely informed" this new edition of The Return of Depression Economics will become an instant cornerstone of the debate over how to respond to the crisis.
- One of the most important general economics books in years
Krugman has written a number of accessible and important books that are well worth reading, (for example: The Accidental Theorist and Other Dispatches from the Dismal Science ) but this book is so well timed, so well written, and so important that it is hard to overstate its impact.
It would be easy to dismiss this book as "cashing in" on the current crisis were it not for the fact that he originally wrote the book in response to the Asian financial crisis nine years ago, and this is just a new updated edition. The difference is that now folks are listening.
Whatever your politics, it is hard to dismiss Krugman's credentials or his reasoning and if you are serious about understanding the current economic situation this book is required reading. ...more info
- Relearning Lessons Our Grandfathers Taught Us
Paul Krugman, Nobel Laureate in Economics, has recast an earlier publication of his 1999 work, "The Return of Depression Economics" to include the recession that has begun in the United States.
The author traces the causes of economic hardships in this century in Thailand, Brazil, Japan, Argentina, Sweden, Mexico, and other Latin America countries. He examines their recessions and their solutions that exacerbated the problem or contained it. These solutions ranged from devaluing the currency to expanding or tightening credit, or changes in tax policy, etc.. His point is that all of these are lessons that the United States ignores at its peril.
The book's expansion focuses on the US and the pitfalls that were made back in 1930 that made our recession into a depression. According to Professor Krugman, many Americans believe that our economy is immune from a 1930s style Depression because of "safeguards" that were taken to prevent such a crisis from recurring. But in the 1980s, traditional banks were given more freedom to do what "they thought best" through deregulation. Unfortunately, deregulation was a double-edged sword that allowed banks to take bad risks," with less incentive to avoid them.
Some on the right blame the sorry state of economic affairs on the Community Reinvestment Act, which purportedly compelled banks to make risky loans to minorities who then defaulted. This law was passed in 1977; it is hardly likely that a law took 30 years to infect our economy. People on the left assert that it was the repeal of the Glass-Steagall Act, which might have moved us closer to our economic woes, but is not the main reason. Krugman believes unregulated institutions that took bad risks helped fuel our recession. When these "shadow banks" outgrew conventional banking, regulation and protection for the public did not follow.
Case in point is the sub-prime mortgages that have failed. Mortgages were made to ninjas (no income, no job, no assets). This was of no consequence to the lender who didn't care if the borrower could not make the payments so long as the cost of housing market kept rising. When housing prices started going to the basement, default rates started going to the attic. But these didn't become ordinary mortgage foreclosures.
The lenders weren't banks but "loan originators." They sold the loans to financial institutions "which in turn, sliced and diced pools of mortgages into collateralized debt obligations" known as CDO's which were sold to investors who placed many of them in pension funds. The better shares were given AAA rating, which would have first dibs on payment. These were considered safe. It became apparent that even these weren't risk-free when the housing bubble burst, and no one was paid.
This brings us to "depression economics." It is insufficient private spending to make use of the available productive capacity, or demand-side economics, which he believes is critical for prosperity. He dismissed supply side economics as a "crank doctrine that would have little influence were it not for editors and wealthy men."
Overcoming depression economics requires bold action. Professor Krugman advises an expansive, Keynesian recapitalization that is at least 4% or 5% of GNP. In other words, a stimulus of gigantic proportions. It will require more government control that borders on nationalization of our financial system until the economy is robust enough to return it to the private sector. He also advocates that the federal government lend money, temporarily to the non-financial sector. And it isn't just the US economy that he is concerned about. By lending money to developing countries and Europe, we free up credit to be used here. The author contends that it is a global economy that requires fixing if we are to survive. "The worst thing we could do is failing to do what's necessary out of fear that acting to save the financial system is somehow `socialist.'"
What is exceptional about this book is the author's ability to make complex economic models simple so even a simple rube, like myself, wouldn't have to fast for a month in the nude, wondering if it would all come to me in a vision. Thanks to PK, I learned far more about the sub-prime mortgage lending, the inner working of hedge funds, than I had known before. Each chapter provided one lesson of instruction after another.
As the professor states, it's time we relearn what our grandfathers taught us.
Being it's April 15th, it's also time for a cup of tea. (I'll drink it instead of throw it).
Taibbi, Matt, "The Big Takeover," Rolling Stone Magazine, April 2, 2009.
Krugman makes the case in his new book, The Return of Depression Economics and the Crisis of 2008, that we have a scarcity of understanding, not resources. He claims that "the only important obstacles to world prosperity are the obsolete doctrines that clutter the minds of men." If you have any interest in uncluttering your mind and achieving some degree of understanding, consider reading this fine book. Krugman writes in a clear style, and uses plenty of examples to illustrate his key points. This book updates the one he wrote in 1999 on the same general topic. The intervening years have made his message even more compelling: we need to abandon the conventional thinking that's getting us nowhere. This engaging and thought-provoking book led me to reexamine my thinking, and to consider the degree to which my mind is cluttered with obsolete thoughts. I highly recommend this book to any reader interested in exploring our economic problems.
Rating: Four-star (Highly Recommended)
- Sometimes Boring, but Also Interesting and Helpful!
Much of Krugman's book is taken up with the late 1990s slump of Asian economies. This material is already covered in the first edition of the book, was mostly boring then, and has not improved.
The new material, added to cover our current economic problems, is much more interesting and useful. Krugman begins by pointing out that because speculative attacks can be self-fulfilling, market psychology has become as important as economic theory. Thus, a floundering economy may need to at first avoid following otherwise sensible (Keynesian) policies. Ouch!
Then its on to "Mr. Bubbles," Alan Greenspan. When his monetary policy finally got traction after the 2001 stock-market bubble, it was only because the housing bubble replaced it. This too was aided and abetted by Greenspan's too-low interest rates. Meanwhile, the deteriorating employment left by the implosion of the first bubble lasted 2.5 years, well beyond the official 8 months length of that recession.
Krugman introduces "shadow-banks" as a major problem (unregulated) today. They used auction-rate securities invented by Lehman Brothers in 1984. Individuals would lend money to the borrowing institution on a long-term basis (eg. 30 years); then at frequent intervals (often weekly) the institution would hold a small auction in which potential new investors would bid for the right to replace those wanting out. The interest rate determined in this process would apply to all funds in the security until the next auction. This $400 billion market collapsed in 2008 as too few new investors appeared to let existing investors get their money out. Similar non-bank assets (totaling about $4 trillion) out of the entire banking system of $10 trillion.
Claimed villains for today's problems include the Community Reinvestment Act of 1977 which supposedly forced banks to lend to minority home buyers who then defaulted. However, the act only applied to depository banks (originating a small fraction of the bad loans during the housing bubble), and it had been in effect for almost 3 decades. Fannie Mae and Freddie Mac have also been blamed, but were largely kept out of the bubble's most feverish 2004-06 period by regulators, and thus played only a minor role. Others blame the repeal of Glass-Steagal - however, the major problem as institutions that never were regulated. Allowing Lehman Brothers to fail 9/15/08 brought a further confidence plunge and drying up of credit. (Krugman, like others, sees this as a major Treasury error.)
Consumer credit also eventually fell as limits were cut and more applicants turned down. Responding to these various problems, the Fed has tried financing various other money sources, but the scale ($50 trillion or so, vs. $800 billion for its normal monetary bailiwick) has proven difficult.
International cross-holdings (eg. the U.S. has overseas assets and liabilities of 128% and 145% of GDP) present another large problem that links major economies together. Hedge funds often borrowed in one currency (eg. low interest-rate Japan) and lent out in higher-rate countries. The crisis created large losses for both funds and borrowers.
The Treasury proposal to buy up $700 billion in troubled bank assets was flawed at the beginning - paying market value would not help the banks' capital position, and paying greater would lead to accusations of throwing taxpayer money away. Even so, it's small compared to Japan's 1998 $500 billion action - equivalent to $2 trillion in the U.S. economy. Regardless, it is unclear how much would reach the shadow banking system,, and whether banks would be willing to lend out the funds (or simply pay them out as bonuses). Further, there is a need to increase global participation, as part of improved U.S. finances would simply improve credit access to Europe, and vice-versa.
Krugman closes with an important point. "The only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men."...more info
- Excellent Recent History and Explanation
This very readable (and brief) tome elucidates the various financial and currency crises of the past twenty years... from Latin America in the 80's and 90's... to SE Asia in 1997... the ruble collapse in 1998... the Long Term Capital bailout the same year... the stagnant lost Japanese decade in the 90's... to our current worldwide financial fiasco.
Short, readable, to-the-point, and wonderful analogies. Highly recommended. (And much better than Greenspan's recent volume, which ---)
Like Krugman, I always thought Greenspan was overrated. Volcker was my idol. He gave us tough love, some Castor oil as medicine, and broke the back of 70's stagflation. Greenspan inherited a world where communism fell (lowering risk premiums) and IT technology rose (enhancing productivity and profits). He helped facilitate the two greatest asset bubbles of my lifetime to occur... in equities, and housing.
It's going to be a tougher world for you boomers from now on. The home equity cash machine is broken. Manufacturing has `left the building'. VP's of Operations are selling suits at Carson's. There's only so many openings left as Door Greeters at Walmart.
Unemployment will rise for at least the next two years.
Boomers will be buying Dockers instead of the Banana Republic. Toyotas instead of the latest Lexus.
Emerging economies will crater next year. States will go bankrupt. The S&P will hit the 600's, maybe 500's sometime in 2009 or 2010...
That gnawing, uneasy, quesy feeling in your stomach? When you look at your 401K statement?
Hey! It's --- only --- money.
Don't worry. Be happy.
- THe message is opposite the title
I would think many people would be trying to figure out what to do in these turbulent times. This book is worth reading to help enhance understanding.
The title of the book sounds depressing but the gist of the message is the current times will not be as tough as the 1930s and that we will recover. ...more info
- Global Economics
I have read standard economics books and understand ECO 101. This book, however, expanded the scope to describe the dynamics of what global trade, deregulated global markets and the global banking system, plays on our economy. Yet it is written in easy to understand language for the non-economists. Very good material and a lot to think about....more info
Although the title makes the book sound dismal, Krugman's book is actually an enjoyable read. The author goes out of his way to avoid a dry, stuffy tone. Instead, he tells simple stories, like the one about the baby sitting co-op in Washington, which he uses repeatedly throughout the book to explain progressively more complex ideas.
For me, the biggest eye-opener offered by this book is Krugman's explanation of the unregulated shadow banking system that emerged in recent years and has been caving in prior to and during this financial crisis. What are auction-rate securities, and why did the market for them collapse? And why didn't this get more coverage in the media? Krugman explains this, in part by drawing upon an alarming speech made by Timothy Geithner, Obama's nominated Treasury secretary, in June 2008 in which Geithner described a "parallel financial system vulnerable to a classic type of run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks."
This is a great book: readable, informative and timely. I recommend it to anyone who's eager to dig into a deeper examination of the underlying causes of the financial crisis....more info
- Nothing great
Nothing really substantial in here. Rehashing of what most already know if you pay attention to the news....more info
- Excellent overview
The other reviewer's have covered this book in much greater detail than I intend to here. I merely want to add a few comments about who I think would most benefit from reading this book. I am certainly an educated reader, but not someone with an extensive background in economics or finance. However I do have a strong business background and a need to understand the dimensions of this financial crisis in order to better navigate my business through it, not to mention the desire as a citizen to simply comprehend what is going on. Consequently over the past year I have read perhaps half a dozen books purporting to explain the current economic crisis. Most of these deal rather narrowly with subprime lending since that was initially seen as the main culprit. But as the situation has unfolded it became clear to anyone paying any attention that subprime is not the entire story and perhaps not even the biggest part of the problem. Krugman's book does an excellent job of filling in the blanks by explaining how this crisis is related to several earlier crises in Latin America, Asia, Russia, Europe, and the United States. He also does an excellent job of explaining how the US banking system works and in particular the role of the shadow banking system. His writing is straightforward, entertaining, and refreshingly free of jargon and abbreviations. I can't say if someone with a strong economics or finance background would get anything out of reading his book. But his intended audience was people such as myself and I would highly recommend it to anybody not already knowledgeable about the subject who is trying to make sense of what is happening and how we fix it. So far it is by far and away the best book of its kind I have come across. Five stars....more info
- learn, not necessarily agree
Everyone should read this book. You do not need to agree with everything. But, you will learn. Krugman is good, though sometime too quick. With the misinformation the politicians and pundits throw out, Krugman and other knowledgeable sources are essential. ...more info
- Good source to get insight
I have found this book useful, if you don't look very detailed and compelling one. I wish there would be more detailed analysis of current downturn of the global economy......... ...more info
- Uplifting Depression
There is a reason why some people win Nobel Prizes. Paul Krugman has demonstrated why he is one such person. Economics can be a complex subject or it can be made very accessible. This book is the best written book on economics since Gailbraith was at his very best. ...more info
Given that the global economic picture is changing daily, this tome is very interesting as an indication of what has led us up to today. Well worth reading....more info
- Brief and concise, but not very deep
This is a slim book (<200 pages with big font and wide line spacing) that covers a lot of material. While I like Paul Krugman's clear, informal writing style and use of analogies to past crises, I didn't find these episodes to be explored as deeply as I would have liked. This book seems more suited to people who are new to macroeconomics. For example, the babysitting coop analogy is a classic, and still one of the clearest, simplest ways to explain the interaction between monetary policy, aggregate demand, and consumer behavior. More data and a few charts would have helped to illustrate the economic and market conditions around the asian and latin american crises, and helped to put the magnitude of these (and the current crisis) in perspective. I liked his discussion of when the severity of some crises seem disproportionate to what fundamental conditions would initially suggest, which sounds a lot like soros' reflexivity (e.g. people perceive a bank to be bad (whether accurate or not), pull their money, cause a run, bank fails, => people create the conditions in which their fears are realized).
Overall, this is a quick easy read, helpful as a concise, clearly written primer on what been going on recently.
- The Return of Depression Economics
Outstanding analysis by the 2008 Nobel laureate in economics. Although my understanding of economics in very limited, I felt he was quite accurate in his appraisals of all the great economic calamaties which have plagued the different parts of the world during the past few decades. This includes the Reagan revolution through Greespan's bubbles with its attempt to install laissez-faire capitalism. Along with Alan Greenspan the George W. Bush administration ran this into the ground encouraging the enormous greed and abuse which nearly destroyed the economy of the U.S. This book is a must read for all Americans to help get us permanently back onto the right track under the leadership of President Barack Obama....more info
- Serious Flaws Concerning Current Crisis
Although I admire Mr. Krugman as one of the great economic thinkers of our time, I think he misses the point, on several accounts, vis-a-vis our current economic crisis.
When Krugman states that the current economic crisis is "functionally similar" to the Great Depression, nothing could be further from the truth, save the aspect of extending tremendous margins of credit with disastrous results.
There is no doubt in my mind, that what will be coming in the near and intermediate future, will make the Great Depression look like a walk in the park.
Some of the major important structural differences, now from then, are:
1. The United States economy is based almost 80 percent on consumer spending and home building -- other sectors, like agriculture and manufacturing are diminished or have disappeared to other countries.
2. Stratification of functional (dysfunctional) economies by countries (China is the manufacturing nation, the United States is the consumer, etc.).
3. The world is so woven into various trade agreements things appear more similar to alliances in Europe pre-World War I; agreements are transnational, yet any nation state attempting to dig its way through an economic crisis is dependent on countries where little or no influence can be leveraged.
4. Due to the structure and placement of the United States in the world's dysfunctional economic system, any efforts at infusing or pumping our economy, will result of most of those funds ending up in Asian nations. In the 1930's that money was cycled through our economy and our production base, not now. Bush, Obama, or whoever, might as well write a check to China and save a step.
5. During the Great Depression, the United States, and many countries in the world, had a strong agrarian base -- a large segment of the population still lived in single family farms. Many people in the cities, since they still had families "back on the farm" could return home during hard times and at least they wouldn't starve to death.
I received my degree in economics years ago from UCLA, and then went into another field, but it is my impression, that leaders and economists need to step back from their data and charts and take a much more "pragmatic" view of our current economic crisis. Imagine a game that goes something like this:
1. One country harvests apples, on country brings the apples to market, one country sells them and another country consumes them.
2. After a period of time the consumer country will run out of money to buy apples.
3. The consumer country, in order to continue to consume apples uses credit to purchase the apples.
4. Running out of credit the consumer country creates value for items in its possession (bubbles) to extend its credit base on an inflated assets.
5. The consumer country creates complex paper instruments to sell back the debt it's owed to other countries, and tricks them into believing it's an "investment."
Well, you don't need a Nobel Prize to conclude how this game will end. In a very simplistic way, this is exactly what happened and none of the proposed remedies have addressed the fundamental and structural problems that created this crisis in the first place. The United States will need to consume significantly less and produce significantly more real goods to make our economy "whole" again.
As for the problem at hand... I have spoken to several economist in both the United States and in Germany who feel that this crisis will have a very bad ending that might include major civil and political unrest throughout the world and unrest that the United States will not escape.
This crisis will not be solved by unlimited government spending that places the burden of bad debt from the debtors to every man, woman and child in the United States for decades to come through increased taxations. Attacking the problem through deficit spending is only moving the bubble around; we will face the consequences for the past 20 years, one way or the other.
If the government is going to spend several $$$trillion, it needs to be spent to address the human misery that will soon be rolling across this country, not bailing out CEO's with corporate jets and $1,000.00 hairdressers. Hurricane Katrina should be a wake up call to everyone in regards to the limits of our own government.
- Masterfully illuminating
For anyone who wants to understand the origins and nature of the world's current financial crisis, Mr. Krugman does an excellent job explaining it all. From dissecting the anatomy of modern day currency crises, to revealing the alchemy of CDO's, you don't have to be an economist to understand what has happened here, as Paul does a masterful job revealing our unfortunate situation. This book reads like a true life suspense novel that we realize will impact us for years to come......more info
- Essential read right now
I just finished read this book, and it is well worth the money I pad for it. First of all - for me, M.SC of Electronics, who were turned by life to sales and marketing and now also to financial analyst, a lot of things where new, and before I bought this book I honestly tried to get a lot of information on topic on web, but failed. What I wanted, was a try to make comparison - of crisis we are all now, with those before. Not only great depression, but also Russian Default, Mexican crisis etc.
If you will try do that by means of google - all you will get - hard to read and extremely dry wikipedia page style data.
As it turned out this book is exactly what i needed - clear, entertaining, easy to understand, and in plain english - all those former crisis revisited, and explained how the clouds where gathering until the storm started, and what we could learn for it.
I understand, that economics is no exact science, and people more professional and more importantly with degrees in economics, would find this book, here and here "incorrect: (in their understanding).
But if you are one of those, who want to finally understand, similarities of those crisis before and the one now, and most importantly - how interest rates mantra fail to save the situation - its a must have title. ...more info
- Excellent writing style for any audience
I wrote my master's thesis on the history of financial regulation in the US; this is an excellent book for people unfamiliar with the jargon as well for those of us with in depth knowledge. My research is coupled with 20 years in the banking industry. Some of the information in his book were in spreadsheets I reported to the Board of Directors of a major bank, but I lacked the 5,000 feet photograph/perspective, so mired in the minutiae of that job. I found the book an essential read for those people who would like an in depth understanding (rather than the CNN version)version of what is happening in the current market. His ability to explain very complex information into an easily readable book could easily give him a Pulitzer/similar prize for non-fiction as well.
A truly amazing book.
That being said, he fails to discuss the role of Federal Interagency Guidelines for Non-Traditional Mortgages (would require a borrower to qualify at the fully indexed fully amortized rate regardless of what product the borrower selected) that was so heavily lobbied against by the likes of Countrywide and brought about the demise of the mortgage industry.
- Demand Side Economics
Depression economics is when conventional economic wisdom no longer applies. In a "normal" recession the Federal Reserve would lower interest rates in order to stimulate consumption and investment. According to Paul Krugman, that remedy is no longer getting any traction. He claims it's time to cast conventional economic wisdom to the wind. The economy is in such a deep hole that he's calling for another $600 billion in federal outlays. This is in addition to the $700 billion already asked for by Treasury Secretary Paulson, and looks very similar to Obama's spending plans for next year.
This is a re-issue of a book written by Krugman in 1999 after multiple economic crises in the decade of the 1990s. Japan had just lost a decade's worth of growth for responding too timidly to the bursting of their stock and real estate bubbles. Krugman also analyzes the various currency crises of that decade: from Britain and Sweden in the early 90s, to Mexico and Argentina in the mid-90s, and finally to Brazil and East Asia in the late 90s. These crises occurred as globalization was doing its work in the currency markets.
In his analysis of Japan's lost decade, he argues that everything must be done to increase aggregate demand. The collapse of demand caused by loss of confidence and fear had severely depressed spending and investment. At that point only government spending can lessen the severity of the recession and perhaps even turn the economy around. In Krugman's view, the lackluster response was the reason it took Japan so long to recover. He believes that one should only worry about deficits and debt when the economy is on the rebound. (This is completely contrary to what Robert Samuelson advises in The Great Inflation and Its Aftermath: The Past and Future of American Affluence.)
Krugman claims that the financial crises of 2008 is "functionally similar" to the Great Depression. He does not believe, however, that it will be as severe. We now have the financial tools and institutions - and the hindsight - to make for a softer landing. Nevertheless, this crisis has no end in sight yet. The one big thing that everyone seems to know now is that one does not increase taxes and implement budget cuts during a crisis, as Herbert Hoover did. And which FDR did several years into the Depression.
Another lesson that Krugman derives from the 90's is the need for greater regulation. As one country after another experienced currency problems from investor flight, there was one country that did better than others to weather the storm: that country was Malaysia. It's leader Mahathir Muhammed was of the same mind as Krugman. Managing the capital flows in and out of the country will soften the blows, should foreign investors decide to pull out. The conventional wisdom of the time was that price stability and currency convertibilty were the only things needed, and that the market would take care of the rest. However, in this case, a little more regulation saved them from a crisis.
Depression economics goes against the grain of conventional economic wisdom, and given the current crisis it is coming back into fashion, even among those who preached deregulation and fiscal restraint a decade ago. This theory should be applied sparringly, only in extreme cases - the present crisis probably qualifies. It should not be applied to every minor recession that comes along. The danger of overuse of depression economics is that it can cause a toxic brew of inflation and stagnation - not to mention corruption. ...more info
- Useful economic analysis, but unimaginative politics
Paul Krugman is a professor of economics and international affairs at Princeton University. This is an update of his 1999 book.
Alan Greenspan, when Chairman of the Federal Reserve, said that a fall in house prices was `most unlikely' and, "not only have financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient." Robert Lucas, a Nobel-Prize winning economist, said, "the central problem of depression-prevention has been solved." Chairman of the Federal Reserve Ben Bernanke said there would be no more boom and bust. Inflated reputations, supply-side economics, free market policies, are all as bankrupt as the banks they serve.
The misbegotten need to `win the markets' confidence' pushes countries to make slumps worse by cutting demand as Hoover did in the Great Depression, by cutting spending and raising taxes. Yet the IMF still tells countries to do this.
After the Great Depression, banks and international capital flows, which had played such a destructive role, were both tightly regulated. But, "Growing international capital flows set the stage for devastating currency crises in the 1990s and for a global financial crisis in 2008."
But with financial globalisation, highly-leveraged financial institutions hold large stakes abroad, which are transmission belts for crises. The `solution' of maximum integration into global capitalism turns out to be the cause of the crisis.
Krugman notes that after Japan's 1991 slump, its government tried zero interest rates, public works programmes, inflation, printing money, building up foreign exchange reserves, export drives to the USA, a $500 billion bank bail out in 1998 - nothing worked.
The present crisis combine a burst real estate bubble and a liquidity trap (like Japan in the 1990s), bank runs (like the 1930s), and currency crises (like Asia in the 1990s), adding up to a global slump. Krugman admits that we need `long-term restrictions on international capital flows, not just temporary controls in times of crisis'.
But there is no solution to capitalism's absolute decline within capitalism, unless you count war as a solution. No capitalist plan works: in each country, only the working class can build recovery.
- Great explanation of economic crises
Paul Krugman's book was very fun to read, educational, and has taught me more about macroeconomics than my ECON 101 course ever taught me. One thing that has always disturbed me is, why can government simply print money? And if they can simply print money, why are there ever recessions? While basic economics courses are supposed to explain that away, I was admittedly still very confused until I read Krugman's book. In a clear, concise manner, Krugman explains through histories of economic crises the role that governments and macroeconomic policies play, and what economists have learned through the decades about recessions.
I highly recommend this book if you have ever been confused about why an economy can suddenly go from "golden boy" status to "the mother of all" recession, or if you have ever wondered what in the world the national banks actually do....more info
- Typical Krugman Screed Disguised as Economic "Analysis"
Amazing how this author has created a mini-industry (with himself as the primary product) screaming and shouting about the depredations of the capitalist system that has so richly rewarded him. With books like this, his column in the soon-to-be-defunct Amazing how this author has created a mini-industry (with himself as the primary product) screaming and shouting about the depredations of the capitalist system that has so richly rewarded him. With books like this, his column in the soon-to-be-defunct New York Times, this charlatan is using the recession as a kind of Trojan horse to advance his crackpot semi-socialist economic, big-government, post-Keynesian, hyper-spending ideas. If it weren't so dangerous, this nonsense would be quite laughable! New York Times, this charlatan is using the recession as a kind of Trojan horse to advance his crackpot semi-socialist economic, big-government,post-Keynesian, hyper-spending ideas. If it weren't so dangerous, this nonsense would be quite laughable! ...more info
- A history of financial/economic crises, with comments on "Depression Economics" would be a better title
This is a revision of an older book of Krugman's and gives excellent (readable and concise, without much technical jargon) explanations (what is understood about) the various crises of the last century. You don't have to have a business degree to follow the stories here and they range from the Great Depression through the South American debt crises, the Southeast Asia crises, the Russian debt crisis and how George Soros saw opportunities and made billions. All this in 191 pages.
You DON'T have to be a liberal to enjoy this book. Krugman doesn't pretend to know all the causes of all these historical events and honestly states, as to several, the aspects that are still not fully understood about them. How many writers are honest enough to do that, instead of pretending to have "THE ANSWER" to suit their ideological beliefs.
Buy this and read it - whatever your political bent you will find this book very interesting. ...more info
- Insightful but too brief
I never read the first edition of this book, which was released about ten years ago, but I found the discussion of the Asian economic crisis - which that book addressed - to be highly informative and enlightening. It probably should have been a bit longer and more thorough, but overall Krugman did an excellent job of explaining very complex economic issues in terms I as a layperson could understand.
The most recent component to the book - which addresses our current economic crisis - was also highly enlightening and informative and went well beyond the shallow analysis one typically finds about this subject on tv or in written form. In fact, I didn't realize just how awful the media's coverage of the crisis has been until reading this book and really getting to the bottom of things. However, in this case it seemed like Krugman really rushed the book to get it published as quickly as possible. I found myself with a number of lingering questions after finishing the book, and since I'm not an economist, I'm not in a position to answer them myself. I also fell like he neglected to fully explain and explore the factors that lead people - even experts - to disagree about the causes and necessary solutions to our current crisis. He does briefly address supply-side economics, but other than brushing it aside as a discredited philosophy he really doesn't talk about it or other economic theories and how they play out today. Finally, the solutions he offers, while interesting and compelling, are addressed so quickly that it almost seems like Krugman cranked out that final part of the book in a few hours. Again, it would have been nice if he had gone into further detail about his proposals, talk about alternatives, and just basically give the entire subject more thorough treatment.
All that being said, this book is pretty easy to read despite its complex topic, and the fact that I got through the whole thing in just a few hours made it well worth my time. I definitely feel more informed and educated about the issues of our day, even though I'm sure I will have to continue seeking out additional sources of information before I truly feel like I understand everything....more info
- Free traders and other market anarchists have nothing on Paul krugman
Krugman doesn't shy away from the prevailing winds of popularized factoid politics and the mainstream misinformation that passes for economic comment these days. He plots a course of actual logic and down to earth facts that political economics are incapable of adhering to.
Every read is a leg up in understanding of whats really happening in today's markets, and from where we have arrived....more info
- Quick and Complete Read on Crisis
Although Mr. Krugman paints some very broad strokes, he explains our current financial crisis in an amazingly clear and concise manner, especially for an economist. I disagree with some other reviews that felt his analogy of the babysitting co-op was a poor illustration of the complex financial markets of the 1990's and today. I appreciate his attempt to paint the public a picture of the dynamic currency and financial markets in the information age, rather than cater his message to members of academia.
The chapter that I especially enjoyed reading was his commentary and analysis of the "shadow banking system". It, as much or more than anything else, contributed to the financial instability that we're seeing now and Mr. Krugman offers an explanation of why the Fed's traditional tools aren't having the affect they had in the past.
Overall, I enjoyed the read and would recommend this book based on its relevancy. I think you'll be surprised to see how foreshadowing this book will be in the new policies and regulations that will come from the government over the next decade....more info
- 2008 Annus Horribilis
According to Paul Krugman, that remedy is no longer getting any traction and thus he invokes to the conventional economic wisdom when the bulls have been dispersed in the infinite savannah of an never come back irrational exuberance. This country and the world economy are in the last edge of several stumbles close to an inevitable precipice, due to the banking, industry, real estate and government mismanagement.
Paul Krugman warned us all back in the late nineties, about the multiple economic crises in East Asia, Japan, Latin America and Europe due to the interconnected globalization. Asking for $600 billon dollars here and $700 billon dollars there, will not fix the problem for the long term. A decade ago, Krugman suggested that we [the world] are facing the return to Dante's inferno of economic conditions, which caused the Great Depression; yet ignored by many if not all... We are just buying time before the enormous and colossal collapse of the world economy finds its reality at "Valhalla." The senses of desperation force the people to believe that there is light at the end of this darkening tunnel and expect that Barak Obama will descend as a Greek god called "dues ex machine" and make all these troubles disappear. It will take more than an Obama to fix all these problems. If society was build based on trust, it will take more than a fervent willingness to regain a blind trust in society. No doubt, as Krugman implies, we need more control and regulation in our financial system...more so we might need to have trust in our financial institutions and government.
Although, the book regards its limits and focuses on the events and actions rather than the individual actors, some cynics might say that every century has its master swindler to robe the people's money and their trust. Carlo Ponzi was the master swindler, in the begging of the 20th Century, and today our new actor swindler is Bernad Madoff, who due to their blinded greed treated his friends and investors as suckers. Yet the danger could also rests on the toxic and dishonest behavior of some members of our government and the leaders of many financial organizations who have sweetened without forcing the word corruption...perhaps, greed is the word.
No doubt, Krugman has not all the answers, but he points in the right direction and places a stepping stone in terms of assimilating what has occur during the past, present and what we could face up tomorrow. He makes you wonder about our responsibility as members of this society and how we could it prevent it so... and how so the year 2008 has been an "annus horribilis" for our posterity...it makes me wonder what 2009 would be.
- "Depression? Probably not. But I'm not sure." Yes he is a real economist
A masterful job of explaining complex economic events in simple language. But Paul Krugman also makes it clear that many things cannot be explained. In the early 1980s, for example, growth slowed down and the reasons are "mysterious". And economists don't agree on exactly why prices don't fall quickly in the face of a recession. If economists are unsure of what exactly happened in the past, the question: What's going to happen next? Is unreasonable even for a Noble Prize winner.
The professor's chart (page 145) on price-to-rent ratios does not go back far enough to see how big Greenspan's Bubbles really were. In Seattle, from 1976 to 1981, I was able to buy new condominiums at an average 7.45 price-to-rent ratio (based on data contained in my book: How to Invest in Condominiums). These condos when rented yielded an immediate positive cash flow. In 1986 I purchased my last investment condo with a 14.2 price-to-rent ratio. It had a negative cash flow. The bubble had started for conservative investors. This longer term perspective suggests that the bubble is far from being fully collapsed and the bottom of the real estate market is nowhere insight yet despite trillion dollar stimulus efforts by the government.
The book must have been rushed no time for an index.
- Big Let Down!!
I was looking for a current day presentation on where things are/could be and how we might function/behave in a "Depression Era" given todays socio-economic circumstances and globally coupled economies. However, all this book really is, is a history lesson of other economies, old news if you will. Even the history lessons were not well tied to our current situation so one could extract relevant behavioral value. To me it seemed like a series of short stories with little to no relevancy to todays conditions. For me a waste of time. I read it while traveling and it had such little value to me I left the book in my hotel room. Not even worth carrying it home. But....that's just my opinion. Maybe I was looking for something more and that was my problem and not the Author's. ...more info