FDL Book Salon Welcomes Nobel Prize Winning Economist Paul Krugman
[It is an honor to welcome Nobel Prize winning economist and NYTimes columnist Paul Krugman to FDL. Stay on topic, please, and remember your manners. Thanks! — CHS]
The Return Of Depression Economics And The Crisis Of 2008 broadened my understanding not just of past errors in the US and a number of parallel crises, but of smarter potential tweaks and substantive change possibilities down the road.
For that, I must say an enormous thank you to Paul Krugman. His snarky illustrative stories and pithy analysis kept me slogging through the dismal economic information with relish. How often can you say that?
This is a highly recommended read for anyone who wants to understand how all the assorted myopic, inept, and greedy schemes and failures dragged down the economy for all of us. As Krugman says:
[T]he good opinion of markets can be fickle…today’s good press does not insulate you from tomorrow’s crisis of confidence.
The prior warnings: Mexico in the 1980s and 90s, the Asian meltdown of the 90s, Japan’s bout with liquidity traps, vast hedge fund tinkering? All lost in a sea of hubris and Friedman-esque justifications for avarice disguised as free market laissez-faire-thee-wells.
Of late we’ve seen a return of some conservatives to the Andrew Mellon words of yore:
"liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…purge the rottenness out of the system."
It’s just disguised in PR friendly euphemisms fresh from focus-grouping, but still pure Ebenezer Scrooge at heart. And something that Krugman dispatches handily:
The specific set of foolish ideas that has laid claim to the name "supply-side economics" is a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men….
Krugman does not stop merely with criticisms, but proposes potential ways forward. He is at his best discussing the Keynesian potential of public works and individual stimulus efforts, to put money in the demand side of the marketplace.
He also details historical precedents for influx of capital into credit markets, as FDR did in the 1930s. He identifies parallels to lending institutions sitting on these infusions, rather than freeing up capital — and proposes incentives to shake the public’s money loose for its own benefit. However, this should be no open-ended giveaway — Krugman advocates relearning the lessons taught so painfully by the Great Depression:
…the basic principle should be clear: anything that has to be rescued during a financial crisis, because it plays an essential role in the financial mechanism, should be regulated when there isn’t a crisis so that it doesn’t take excessive risks.
An analyst at the Heritage Foundation just started reaching for his pitchfork. But Krugman is right — if you expect American taxpayers to bail you out, then a price ought to be attached. Transparency, accountability, oversight and some common sense ought not be too much to ask, given the stakes for all of us if they continue to fail.
There is so much more in this richly detailed book, but that wouldn’t leave room for needed questions: about panic journalism mode once the housing bubble collapsed, while feigning ignorance or indifference only days beforehand. Or questions about whether Congress, the Bushies or the incoming Obama administration will have the wherewithal to do the hard work. How can average Americans make better decisions as we go forward to protect assets — large or small? Or how we’ve all taken on the risk of retirement that used to be carried by employers along with the insane costs of health care.
What about our increasing debt load? How do we better manage global interdependencies? Or the Greenspan mystique, even after all of this.
With all that hanging in the air, I welcome Paul Krugman, and open the floor for your questions and discussion.