Friday, July 22, 2011

It's official

It appears I was eight months early in predicting mainstream recognition of economic depression "towards the end of 2010" in RGD:
We can only hope that the politicians huddled in Washington and Brussels succeed in averting these threats. But here’s the thing: Even if we manage to avoid immediate catastrophe, the deals being struck on both sides of the Atlantic are almost guaranteed to make the broader economic slump worse.

In fact, policy makers seem determined to perpetuate what I’ve taken to calling the Lesser Depression, the prolonged era of high unemployment that began with the Great Recession of 2007-2009 and continues to this day, more than two years after the recession supposedly ended.
Of course, Paul Krugman has no idea what he's talking about. This is not a lesser depression, it is a larger depression. The full scale and scope simply isn't apparent yet.

That's why I referred to it as "the Great Depression 2.0" in RGD. In the 1930s, only the USA exacerbated the situation with Keynesian stimulus policies. In the 2000s, China, Japan, and the European countries all engaged in such policies, with China and Japan spending an even greater portion of their GDP on them than the USA. Therefore, we can expect the Great Depression 2.0 to be a genuinely worldwide one, as opposed to a mostly American one in the 1930s. It's not that Europe didn't experience a depression, but it wasn't known as a "Great" depression because it was largely over by 1933.

"Europe’s subsequent decline was gentler, shorter, and smaller as European governments did not engage in the same heroic attempts to fight the effects of the contraction that the U.S. government did. There was no European Reconstruction Finance Corporation or New Deal to prolong the downturn, so the European economies hit their collective nadir in 1932 and had already grown past their pre-depression levels in 1936. With the exception of Germany, which suffered from the economic complications of a socialist government, crushing war reparations, and the famous Weimar Republic hyperinflation, unemployment in Europe was lower than in the United States. While U.S. unemployment reached an estimated peak of 24.9 percent in 1933, British unemployment peaked at 17 percent in 1932 and French unemployment never even reached double digits. Japan saw neither a big pre-1929 boom nor a massive post-1929 bust...."
- RGD, p. 178

UPDATE: Okay, this comment made me laugh.
I’m honestly sorry to say this, but when you start your article with “Amanda Marcotte is right,” you’ve pretty much just taken your credibility, shot it in the back of the head, and are now frantically digging a hole to bury the corpse in before somebody comes to investigate the loud noise.



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