Are We Entering The Third Depression?

Paul Krugman, economist and NYT columnist thinks so, and suggests that now is not the time to radically cut back in spending. He says that recent speeches coming out of Europe seem to be taken from the Hoover playbook, and he’s worried.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

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.

And this third depression will be primarily a failure of policy.

He says that future historians will see the current economic upturn as similar to an upturn that began in 1933.

While governments worry about inflation, Kurgman is concerned that the US and Europe are headed into a “Japan-style deflationary trap.”

Cheerful stuff.

The Third Depression [NYT]
Krugman: A depression is coming [Globe and Mail]

Comments

Edit Your Comment

  1. technabob says:

    Judging from the insane, around the block lines to buy iPhone 4s last week, I’d have to say we’re either not as bad off as we think — or our priorities are just seriously f–d up.

  2. Loias supports harsher punishments against corporations says:

    I wonder which failure of policy he’s referring to?

    Governmental?
    Lack of (governmental) oversight?
    Lack of (bank) regulation?
    Greedy bank policies?
    Greedy people policies?

    What a very non-specific cause.

    • crashfrog says:

      I think specifically he’s talking about Treasury policy designed to prevent inflation during a time when unemployment is at 11% and inflation is literally at 0%.

    • ipsedixit says:

      Krugman has been pretty clear over the past few weeks that the focus on deficit reduction and decreased spending is going to hurt the recovery efforts. If I remember the article correctly from this morning, he’s pretty specific that attempts by more solvent nations to avoid the pitfalls of a Greek style default are, in fact, the policy failures he’s referring too.

      Krugman believes pretty strongly in the Keysian fundamentals of economics–a government should spend during recessions because spending is the only thing that can get an economy moving again, and then save during economic upswings, because government spending is less important.

      His main point is that we are trying to reduce government spending too early–deficit hawks are jumping the gun because the economy isn’t back on track yet.

      • TuxthePenguin says:

        The problem with Keynesianism is that governments can easily spend, but its the restraining during the upticks that they have problems with.

        That being said, just suspend the payroll taxes for a year – both employer and employee – and promise that any new net hires will be exempted from employer payroll taxes for another five years. That’d get people to hire. Not to mention free cash for people to spend themselves (its an instant ~7% raise). Only problem with that – they’re be a revolt when it went back into effect.

        • ipsedixit says:

          why are private firms going to hire taxed or untaxed employees if there’s no demand, as people refuse to spend? That’s a chicken or the egg question–companies would have to assume that hiring would create consumer demand that isn’t there until they hire.

          • TuxthePenguin says:

            That’s why I suggested the payroll tax. If you waive it, you give money both to the employee/consumer and the company.

            Even if they only spend half of that payroll tax refund, that’s increased spending across the economy.

            • ipsedixit says:

              That seems like a somewhat roundabout way of going at it. You’re still increasing the deficit by reducing revenue, and you’re helping the people who already have jobs. The unemployed are left hoping that tax cuts create jobs, which is right back to trickle-down economics. That’s been a pretty popular theory over the past 30 years, but I think that we’ve seen the end of it as the sole means of fiscal policy.

              When we’re trying to fight unemployment, why does the answer have to be to cut taxes for the employed? If we’re going to increase the deficit through fiscal policy, why not do it while providing more jobs directly to the people who need them?

            • ARP says:

              That’s a variant of trickle down economics. As we’ve seen for the last 30 years, it does not work. We’ve had some of the lowest income tax rates in history (paid for by deficit spending BTW) and it only helps the lucky few. If you’re really wealthy- you have more money than ever. But if you’re middle or lower class, your wages have stagnated. Of course the natural reaction is to get angry at the small amount of taxes you already pay, rather than at the fact that wealthy have been suppressing wages for a while.

              It’s also no coincidence that we had massive infrastructure spending , a much larger middle class, and relatively high quality of life during the 50’s, when union membership was nearly at its highest and the top tax rate was between 70% and 90%. Hell, Nixon even capped wages. Of course, it was difficult to become obscenely rich, given the high tax rates. So, we’ve sold out everyone through our tax policy, so that a lucky few can become billionaires rather than just multi-millionaires.

              .

              • Jevia says:

                But an elimination of the payroll taxes (FICA, SSI, etc.) will primarily affect lower and middle classes because those taxes are capped at a certain amount of income. Thus, the wealthy only get a very small percentage of their overall income taken out in payroll taxes. Also, most of the wealthy have their income based on non-payroll type income, such as profit sharing,dividends, interest income, stock options, etc.

                • thisistobehelpful says:

                  Eh, it won’t really affect or help us. We’re short by a lot more than our taxes take out per year at this point. My mother was making at my age in 1986 what I made when I was last employed in 2009. That’s a pretty long time for a wage to be stuck. While of course I would love having my entire paycheck returned to me, it won’t make any difference in the long run. It would extend my savings bumper a very tiny amount but I still wouldn’t be helping revive the economy with that extra hundred or so bucks a paycheck. It wouldn’t have even gotten me health insurance or made up the difference between a single person’s rent and having a roommate.

                  Tax the super rich. Not gonna happen though because the poor in this country defend their right to make money of the rest of us as if that will also make them rich.

    • rpm773 says:

      Monetary policy.

  3. backbroken says:

    Meh. Certainly not great news, but then again, a real depression features people standing in line for apples, not standing in line for iPhones from Apple.

    • smo0 says:

      +438752902736590832401

    • sleze69 says:

      Paul Krugman hasn’t really been on a roll with his last few predictions…so I am optimistic about the future now :)

    • TouchMyMonkey says:

      So it’s more like the Second Malaise Era. I should order my polyester leisure suit and big, slow car.

    • Bort says:

      you my friend, have a way with words!

    • TPA says:

      You’re assuming people have some understanding of fiscal responsibility, which they obviously don’t. Many college students are using student loans to fund a lavish lifestyle that they truly can’t afford. Of course they’ll buy a new iPhone — everyone else they know is! Why not? They still have money left in their bank account, even if it is 100% loan money.

    • SenorBob says:

      You seem to be under the impression that EVERYONE was completely destitute during the Great Depression. That’s simply not true. There were plenty of people with money.

      • backbroken says:

        I’m not under that impression at all.
        But I definitely don’t think that there were hours long lines for middle class luxury products during the great depression.

    • lakecountrydave says:

      You are forgetting that there was no social safety net during the Great Depression. If all of the people currently receiving UI, SS, food stamps, etc. were left to fend entirely for themselves I am sure that you would see more bread lines, and it would be easier to find an apple to purchase from a street vendor.

  4. donssword says:

    Great.

    Let’s make sure Futures Traders all overreact now, so we turn this into a true self-fulfilling prophecy.

    • yagisencho says:

      It’s not prophecy – it’s observation. Something the policy-makers of the world seem to do a lousy job at.

    • formergc says:

      Don’t worry – nobody in business actually listens to Krugman.

  5. Bernardo says:

    So I’m kinda hopping the shit hits the fan when y two year lease is up for my Greenwich apartment. That way I can find someplace else in the area bigger and cheaper. My goal is to pay off all of my debt and save before it does hit the fan. So when it does The most i need to worry about is food and rent.

    • Pryde987 says:

      Are you a psychopath? Sociopath?

      • Bernardo says:

        New Yorker.

        • Bernardo says:

          Is there really somthing wrong with getting ready for when things are about to go bad, planning for it and then hoping things go in my favor?

          I am pretty sure thats called being responsible.

          • hansolo247 says:

            Agreed.

            I WANT housing prices to fall to a more appropriate level. Why? So I can take the piles of cash I’ve saved and buy one.

            They’re still plenty overpriced from a price:rent ration here in FL.

          • Pryde987 says:

            You are literally hoping for an economic collapse (shit hits the fan) so you can afford a nicer place to live as an individual.

            You are a psychopath.

    • jamar0303 says:

      And how likely is that to happen? Not with a couple of Chinese newspapers are pointing out that moving to the US on an investor visa and declaring a piece of real estate as your investment (I imagine a loophole is used here; I don’t think the E-2, EB-5, or other related visas are intended for this purpose) is cheaper (if you’re willing to plow through the red tape) than buying an apartment or house locally in the largest cities.

  6. Eat The Rich -They are fat and succulent says:

    For the 5th year in a row I have watched my paycheck and annual salary increase come in below the inflation rate, even for exceeds level work.

    My “long depression” has been going on since 2004.

    • AnonymousCoward says:

      2003 for me….I made more in actual dollars in 2003 than I made in 2009, and I’m on track to do worse than inflation again this year. And I’m in one of the “growth” fields.

      • Nigerian prince looking for business partner says:

        I’m making about $10k/year more than I was back in 2005. However, I’m now spending around $8,000/year on health insurance for my family, while in 2005 I paid $0/year for significantly better coverage.

        • dolemite says:

          If you count inflation, I’m making less now than before (as my employers only gave a 1.5% increase in the past 2 years). My 401k was cut, and health insurance is all but unaffordable. For a family of 4, it would be $450 per paycheck AND there is a $2,200 yearly deductable PER PERSON. On top of this, workload went up probably 10-15% (because we are so busy). Thing is….my company is more profitable than ever, they are just pocketing it all and using the recession as an excuse to cut benefits/pay.

    • Elcheecho says:

      really? 2008 was pretty high but 2009 was negative and the other years have been on the lower side of 2-3%.

    • hansolo247 says:

      I guess I’m fortunate. My raises have all been in the 6-7% area, except last year which was 3%. Nominal salary has grown 40% in the last 5 years.

  7. FrugalFreak says:

    Innovation from within is what can propel Us out of the Depression. We haved moved from a invent/produce society to a service society and that is not working. We need to reduce global and get back to the basics of saving money & investing money in tangible USA made goods by USA workers. The prices may increase, but so do the spenders wallets who will buy the very goods we produce. As long as industries pay mere sums for barely living wages and banks stay hesitant to loan money, The people can’t invest, buy, invent.

    • veronykah says:

      Your point makes so much sense. Sure, the price of things would increase when we start paying US workers to make things again but people seems to forget that those workers in turn would be able to SPEND the money they are making.
      If you move from Nowheresville USA to NYC your prices for everything increase, but guess what? So does the amount of money you make.
      I think shareholders are just scared they will make less money, and there in lies the problem.

      • FrugalFreak says:

        TY, This maximum profit society is killing itself. a profit onlysociety will not work. Industry has to learn that profit is not all that makes this economy work. They should lower profit expectations and sink some of those profits back into workers. IMO that is one of the cause of all of this, overstated & unreasonable profit expectancy robs the wheels that drive that profit.

      • ARP says:

        The only nit I have with your premise is that if manufacturing jobs only pay minimum wages, they there won’t be much extra money to spend. I don’t see the wealthy reducing their paychecks, and so prices will need to go up. Unless there is some sort of law or some group of people that can join together to keep wages high, you’ll have lot’s of people working (good), but could unravel, when they really can’t afford any more than the basics. The only way to prevent that is to have a large influx of jobs so that competition increases, but I just don’t see that.

    • twophrasebark says:

      You make very good points. Therefore, I think some mysterious government agents will be coming to make you disappear pronto. The current system is set up to benefit a small elite — not society as a whole. Ergo, they don’t want a system that creates more wealth for all. They want a system that perpetuates obscene wealth for just a few…

  8. FrugalFreak says:

    Innovation from within is what can propel Us out of the Depression. We haved moved from a invent/produce society to a service society and that is not working. We need to reduce global and get back to the basics of saving money & investing money in tangible USA made goods by USA workers. The prices may increase, but so do the spenders wallets who will buy the very goods we produce. As long as industries pay mere sums for barely living wages and banks stay hesitant to loan money, The people can’t invest, buy, invent.

  9. dabarak says:

    What this country needs is a good five cent cigar and a lovely world war.

  10. WeirdJedi says:

    I’ve been looking everywhere in my area for a job. I know friends who are looking for a job. We even apply at fast food part time jobs, with no result. If this isn’t a Great Depression, I don’t know what it is.

    • swarrior216 says:

      same here. ive been out of work since december. ive applied everywhere and still no luck.

    • dolemite says:

      My wife just got out of school with 2 degrees. One for paralegal, and one for respiratory therapy. So far, she has had no luck. Well, I take that back. She had an offer for an entry-level position at a firm, but we had to turn it down because they don’t have health insurance. They basically give you a stipend to get insurance on your own, but due to pre-existing conditions, she is not elligible for health insurance on her own. That’s one reason I am glad the government is getting involved with health insurance. A job shouldn’t come down to “do you have insurance or not?”

    • shadypeeks says:

      Well, I started a service based business 3 months ago and so far have had 2 similar companies show interest in me coming to work for them. Perhaps it’s your perspective and expectations that should change. Why simply hire you because you want to be hired. Why not hire you because you are currently proving your worth?

      • savagemutt says:

        Wow! Pretty rapid fulfillment of ARP’s prophecy.

      • DorsalRootGanglion says:

        Not every person has the current financial resources to begin a business, especially one that requires any sort of materials or advertising. For those who have been unemployed for long enough, there may not be enough money left to do anything but pay for necessities, let alone start-up costs.

        Also, not everyone has training as a computer scientist or advertising exec, nor can some people afford to be “self-employed,” which comes with 0 health benefits and 0 long-term planning prospects. Good for you for magically having a marketable skill, but two companies interested isn’t the same as two companies paying your bills. There was a New York Times article on entrepreneurship and it boiled down to people having something to put on resume without making much actual difference in life.

    • ARP says:

      According to ultra-capitalists, it means you’re stupid and/or lazy. Only hard working and intelligent people are wealthy.

      /snark

    • mandy_Reeves says:

      I hear ya! I applied for Taco Bell and Five Below(tween targeted store specializing in cheap accessories and cheapl made, but awesome crap priced from 1-5 dollars) and still have not heard a THING from these folks. I have checked back and still nothing.

      I did the census for a few weeks, but that ended now so…. My husband tried walmart and target but was told he was over qualified

  11. MaytagRepairman says:

    Maybe Kevin Costener has a machine for that too?

  12. psm321 says:

    I fear so. The fix for a recession is government spending to get people employed (preferably directly) and spending again, and boost everyone’s confidence. Our current government, however (yes, Democrats too) seems intent on just more tax cuts for the rich who will keep hoarding the money. With the crumbling infrastructure in this country, a WPA-style program would go far in renewing our national infrastructure and rejuvenating the economy at the same time

    • dolemite says:

      I’ve noticed this too…each year, the “millionaire” or “billionaire” lists grow tremendously, but the average joe takes paycuts or layoffs. This is why I laugh when people complain about a small percentage of people paying the most taxes. Well duh, they are hoarding all the damn money.

    • mdovell says:

      Government support for what though…the recovery act was supposed to prop up states and local governments for awhile..and it did but is now running out. A WPA style plan wouldn’t work because we are already developed.

      More importantly Krugman does not advocate for any real solutions…keysian economics does not work. If we constantly spend without account we create inflation.

      Think about it for a moment

      We have a strong dollar but
      we have rock bottom interest rates

      We have high government spending but
      lower taxes (still under the bush era ones)

      Do we want inflation or unemployment? It’s like the 70’s all over again.

      More importantly the idea that we’d have a depression like the 30’s is a joke at best. We have big agra right now..adm, monsanto, con agra will pretty much ensure we have cheap food (although not always healthy). Unemployment is still much lower than the depression..I still see people in malls and in schools so people are spending money…if they didn’t have it we wouldn’t have traffic etc.

      The trouble comes down to the following:

      1) We’re obsessed with keeping prices low or giving everything out to everyone (which is why the student loan industry via the government makes tuitions high). Face it not everyone can have everything..remember that 0% interest rate stuff post 9/11

      2) there are jobs out there but they are specialized. The idea of general employment doesn’t exactly work. “Giving someone a chance” can also be a “risk” to someone else

      3) Companies are mobil but people aren’t nearly as much. So a company might get a short term mortages on its location..but people end up with a 15 or 30 year one…people can have kids and get married but companies can exist out of a po box…

      4) we’re way too obessed with our own standards but they don’t even exist in other parts of the world. It is hard to justify a healthcare mandate when in other parts of the world they mandate you put down your weight on a job application! Others require height and a modern photo…

      • Jevia says:

        We certainly could use a WPA to rebuild roads, bridges and other infrastructures that are crumbling, and new infrastructure based on green technology to remove our dependence on oil.

        People may be in malls, but are they actually spending anywhere near the amount as before? Also notice that when people do spend, its for stuff that is on sale, i.e. the deflation that is of concern.

        Unemployment may be lower than the Great Depression, but remember that we also now calculate ‘unemployment’ differently than they did back then. There’s not as much of a difference (yes still some, but not as much) when the rates are calculated the same way.

        Yes, inflation is low. So low in fact that more spending is not going to hurt us, at least for while. But so many people (i.e. Republicans) want to stop all spending all together.

        You are correct that companies are more mobile than people, and that is actually what may keep us in a ‘long depression’ because people can’t just up and move to where new jobs potentially may be because they are tied to their 30 year mortgages on homes that are underwater. Perhaps after enough people get foreclosed on, they’ll be able to move around a bit more, but that’s not going to help get this country out of its economic troubles.

        People are in school because they can get federally backed student loans for a song and school is better than being unemployed for some people.

      • psm321 says:

        The recovery act was too focused on tax cuts. The obvious fact (that only corporatists and rich people won’t acknowledge) is that tax cuts do not stimulate the economy much. There is plenty of crumbling infrastructure we could be repairing, or how about some new projects like clean energy, mass transit, or a TVA-style program to bring high-speed internet access (which is quickly becoming essential for everyday life) to rural areas?

        Your points 2 and 3 are why we need government-sponsored jobs until the economy is back and running. Does somebody with no special skills but who’s willing to work deserve to starve? As to point 4, having true single-payer health insurance would actually stimulate the economy (except for the for-profit insurance companies) as people would be less afraid to take risks and move around, start their own businesses, etc.

        The fact is, government spending is what got us out of the Great Depression, and is what needs to happen to get us out of this situation. BTW, side-note: I love when people who oppose spending claim that the New Deal didn’t get us out of the depression (which I disagree with by the way), but that WW2 is what did it. They seem to forget the minor fact that there was lots of government spending in WW2 which is what stimulated the economy even further. (Not that I think that starting unnecessary wars now is the best way to fix things though…)

  13. Dallas_shopper says:

    Better learn how to grow your own food and make your own clothes.

    Seriously.

    Hopefully you won’t need those skills, but you never know. I own guns for more than just self-defense.

    • JuliB says:

      I use my Sig Sauer to make my owns clothes at home.

      • Dallas_shopper says:

        Hope it never comes to that for you but I already know people…college graduates…doing the “urban homestead” thing out of necessity. They’ve downsized all they can and they’re now repairing their own clothes or making new ones out of old ones and growing food to save money. It’s really rough out there for some people.

      • BurtReynolds says:

        I wear guns for clothing.

  14. areaman says:

    When I have time later I’ll look up the Long Depression on Wikipedia and see if I can draw parallels. I don’t know enough about it to agree or disagree with Krugman. In the mean time please post about it (there’s a lot of well read people on here I noticed) if you feel inclined.

    I do agree we are going through a deflationary period. Would stink if we follow Japan in this way.

    “And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.”

    Lately I’ve seen and heard the affects of long term unemployment through the news and personal experiences of friends. This strikes me as odd because I think this is the first time long term unemployment has been in my lexicon.

  15. Traveshamockery says:

    Krugman is a big supporter of Keynesian economic theory. His idea of solving the recession is to spend currency created out of nowhere by deficit spending, which has a huge number of negative potential outcomes.

    Obama’s first $700 billion stimulus failed miserably to reverse job loss in this country. Another stimulus will do no better, and will further retard spending because of the fear of higher taxes to help pay off the debt.

    He’s not an unbiased source…he’s selling a bill of goods, and any reader should evaluate his claims carefully before supporting his ideals.

    • microcars says:

      so your solution is….?

      • Traveshamockery says:

        The optimal solution would be for the government to stay the heck out of the financial sector, and quit doing social experiments with taxpayer dollars to artificially boost the housing market.

        The Canadian real estate market didn’t crash while ours did, taking the rest of the economy with it. Know why? Because they don’t view home ownership as some sort of divine right. Government meddling caused the housing mess, which led to the rest of the mess.

        To solve the current slowdown, we must create new jobs. Sorry, but government stimulus does nothing but increase the size of government, which makes businesses hold back on investment in anticipation of new taxes. Also, the type of jobs created by the previous stimulus were not quality jobs. Working a guy for two weeks at $15 an hour building a road doesn’t do much when he’s unemployed again in week three.

        At this point, the only way to get businesses to reinvest and hire more people is to cut back on government spending (removing the fear of additional taxation) and use cuts in government programs to pass tax cuts on business investment. Those tax cuts, which could be phased out over the next ten years, will help encourage hiring, which will lead to greater spending, which will in turn make those businesses more profitable, generating even more jobs.

        • DorsalRootGanglion says:

          Er, I thought some of the reason for the lack of Canadian collapse is that their regulation wasn’t neutered and oversaw by the very people it was supposed to regulate. Nudge-and-wink regulation does jack shit when regulation leads to a decrease in profit.

          Also, woot for trickle-down theory! How’d those 80’s work guys!

          • Jevia says:

            Trickle down worked quite well for the top 5% of the country. They say thank you. Too bad for the rest of the country. A few good years, sure, but look at us now.

        • microcars says:

          You have it exactly backwards.

          The Canadian Housing market did not collapse because they have stricter lending standards for mortgages (like we used to have!).
          They stuck to their “regulations” while we relaxed ours to the point where anyone that could breathe could get a $500,000 loan.

          NINA loans did not come from government “social experiments”, they came from “the free market”.

          • BurtReynolds says:

            Exactly! The Canadian banks actually asked you how much money you made, what your current debts were, and then used a number that wasn’t 60% of your disposal income to tell you what you could “afford”.

            In most major metro areas in the US, the median housing price is unattainable for the median household income. How is this sustainable? Are rich people just buying 2-3 homes? Does housing supply only exist of million dollar homes and the rest shanties with nothing in between?

            When I look back at what happened to this country over the last 30 years it makes me want to cry. It should make the Greatest Generation cry as well. Their kids, my parent’s generation really tore the U.S. down from the inside.

        • LandruBek says:

          Government meddling caused the housing mess, which led to the rest of the mess.

          This notion has been debunked.

          • john says:

            That’s a good one! Debunked by MediaMatters? I almost shot milk out of my nose, laughing so hard!

    • ARP says:

      Krugman’s main argument is that the first stimulus was not enough at that it basically prevented things from getting worse, but did nothing to improve the situation. Also remember that in order to get it passed, much of that “stimulus” were tax cuts. So, it was basically a situation where compromise probably led to a worse outcome.

    • MonkeyMonk says:

      I think you mean the George W Bush 700 billion stimulus. One more thing that Obama inherited (although he did vote for it) that he’ll continue to get blamed for.

    • LandruBek says:

      I disagree: the first stimulus worked as well as could be expected: it slammed the brakes on the then-skyrocketing unemployment. It was not a failure, it just didn’t go far enough. A Keynesian approach worked a lot better in the Great Depression than did Hoover’s austerity: I think it is the best way forward.

  16. twophrasebark says:

    The failure is a human one. We know quite well what caused this depression — lack of regulation and risky behavior by financial institutions and corporations.

    The problem is that humans are very good at saying “this time it will be different because of [bullshit bullshit bullshit].” Then the humans act surprised when the economy craters. Some of them say “it’s those other humans’ fault!” Either way, the economy takes a dive. It doesn’t take a Nobel Prize to figure this out.

    • Traveshamockery says:

      Wrong. The collapse was started in the housing market, after subprime loans fell apart. A large number of those were subsidized by our government to get people into houses they couldn’t otherwise afford.

      There were plenty of other accessory causes, but the big one can be attributed to the government engaging in social engineering to fulfill some weird notion we Americans have that owning a home is the right of everyone.

      • twophrasebark says:

        “We know quite well what caused this depression — lack of regulation and risky behavior by financial institutions.”

        This would cover subprime loans.

      • microcars says:

        really? so the government subsidized a massive number of No Income, No Asset verification loans as a “social experiment” because everyone should own their own home?

        fascinating theory.

        So when the credit markets all froze up and the entire Financial Sector needed an 800 Billion dollar bailout, that was because of government subsidized loans that went “bad”?

        Are you saying banks were forced to loan money to people that could not pay?
        Are you saying banks were forced to bet on these loans and leverage themselves at 30:1 odds?

        • BurtReynolds says:

          Yeah, if there is one thing this country is incapable of doing, it is telling the banks to do something they don’t want to do. Maybe the former CEO of Countrywide would argue they were “coerced” into giving those bad loans, but in reality, they saw dollar signs and went after them. Plain and simple.

  17. ipsedixit says:

    That seems like a somewhat roundabout way of going at it. You’re still increasing the deficit by reducing revenue, and you’re helping the people who already have jobs. The unemployed are left hoping that tax cuts create jobs, which is right back to trickle-down economics. That’s been a pretty popular theory over the past 30 years, but I think that we’ve seen the end of it as the sole means of fiscal policy.

    When we’re trying to fight unemployment, why does the answer have to be to cut taxes for the employed? If we’re going to increase the deficit through fiscal policy, why not do it while providing more jobs directly to the people who need them?

  18. microcars says:

    Recession is when you know someone who has lost their job.
    Depression is when you lose your job.

    • tbax929 says:

      If that’s the case, I’ve gone from a person depression to a personal recession.

      I lost my job last year then landed my dream job at an amazing pay rate, but most people I know are still looking. So I’m personally happy, but sad for others.

    • LandruBek says:

      I think would hate Ronald Reagan slightly less if he weren’t so widely revered (and quoted, hence this comment). What a horrible president he was!

  19. twophrasebark says:

    We should have more free market theories because we don’t need regulation. Just like we don’t need police to keep people from robbing each other blind and killing each other, we can implicitly trust society to self-govern itself. Or the food industry — why should we tell them how much arsenic can be in our food? Let the market sort it out. When you think of these kind of examples, it becomes so clear why financial markets should be allowed to regulates themselves.

    • mdovell says:

      Since when has the federal government prevented something on a massive scale (outside of military for defense?)

      If regulation was a good thing why has there always been more unemployment in Europe?

      How come there’s no evidence that people are healthier at age 70 than age 60 (you figure with medicare they would…so the arguement that health care means people are healthier doesn’t always work…)

      FDR’s war on crime in the 30’s didn’t end crime, LBJ’s war on poverty (seriously…shouldn’t it have been called war on things causing poverty?) didn’t work, war on drugs didn’t work..so expanding government (which has always happened) doesn’t help.

      The federal health plan is largely taken from the mass plan which is nearly set to dissolve in a few years.

      • DorsalRootGanglion says:

        Oddly enough, as we dismantle the rules and regulations in banking, the banking industry has taken us in new and exciting directions…mostly in terms of corruption and bad business practices.

        European regulations come in many flavors, some of which increase unemployment in certain groups. This is true. I doubt the US will ever institute France’s policies about not being able to fire people, which inflates the French youth unemployment rates.

        However, http://utip.gov.utexas.edu/papers/utip_25rv3.pdf has an interesting take on why earlier unemployment rates in Europe (pre-mess, up to 2000) were so high. They mainly related to not so much government regulation, but patterns in migration, the structure of the school system, etc. Take a look. It’s not as simple as MORE REGULATIONZ = MORE UNEMPLOYMENT FREE MARKET GOOOOOOOOOOOO.

      • DorsalRootGanglion says:

        Heyyy….hit submit too soon.

        “How come there’s no evidence that people are healthier at age 70 than age 60 (you figure with medicare they would…so the arguement that health care means people are healthier doesn’t always work…)”

        Part of the reason people aren’t healthier stems from the massive income disparity in this country. Our overall average life expectancy is a lot worse than other countries in part because of our terrible health care, not due to government health care. Our poor tend to be sicker and die earlier since, among other things, poor people don’t get treated for things that become huge problems later on. High blood pressure and LDL levels untreated –> heart attack later on. Odd lump untreated —> Stage 4 diagnosis instead of Stage 1. Hell, if you look at the racial backgrounds, white women tend to live 10 years older than black men, in part because black men tend to be poorer and yes, tend to be involved in more violence.

        As for MassHealth, I’m forced onto it in a few months because my COBRA ends, my two jobs don’t offer health care to my type of worker, I have pre-existing conditions that would get me rejected from any health care even though those conditions are easy to manage, and I can’t find a real job that gives me health care. It’s a depressing situation that insurance is tied to jobs. We’re having people die from lack of care because their conditions make them unable to work, but disability/SS only go so far.

        But then again, killing and punishing poor people is always part of the free market model.

        • mdovell says:

          “Part of the reason people aren’t healthier stems from the massive income disparity in this country. Our overall average life expectancy is a lot worse than other countries in part because of our terrible health care, not due to government health care.”

          Huh? The USA still has a high life expectency. One of the highest in the world
          https://secure.wikimedia.org/wikipedia/en/wiki/List_of_countries_by_life_expectancy
          USA is at 78.2 years and the top is japan at 82.6…arguing over less than four and a half years is pretty pointless. Also simply having health care only extends life span on average six years. Health care is not about longevity but rather human suffering.
          http://moremoney.blogs.money.cnn.com/2009/08/14/dont-blame-health-care-for-poor-longevity/

          The reason why we don’t live as long is largely due to large amounts of smoking and obesity. Even then come on now 78 years is a pretty long time to live.

          “Our poor tend to be sicker and die earlier since, among other things, poor people don’t get treated for things that become huge problems later on. High blood pressure and LDL levels untreated –> heart attack later on. Odd lump untreated —> Stage 4 diagnosis instead of Stage 1. Hell, if you look at the racial backgrounds, white women tend to live 10 years older than black men, in part because black men tend to be poorer and yes, tend to be involved in more violence.”

          But health insurance in at itself does not extend a life span that much.

          “As for MassHealth, I’m forced onto it in a few months because my COBRA ends, my two jobs don’t offer health care to my type of worker, I have pre-existing conditions that would get me rejected from any health care even though those conditions are easy to manage, and I can’t find a real job that gives me health care. It’s a depressing situation that insurance is tied to jobs.”

          That comes from the Bismark model. It’s the same as what they have in Germany since the 1880’s. There’s the bismark system, the belvedere system (uk), hybrid (canada) and what we have

          “We’re having people die from lack of care because their conditions make them unable to work, but disability/SS only go so far.”

          Well what you just said doesn’t exactly make sense. If people have health care then under your argument they’d be able to work. So why isn’t unemployment in mass low? Come on now peoples health is largely dictated to what they do and what happens to them. That show boston medical just showed a lung transplant for a women with emphysema! It didn’t even say if she stopped smoking. If someone smokes why should they even be in a 401k for that matter? People are not denied emergancy care..if someone is shot or stabbed they get treated. The top causes of death in the usa are from things that we have no cure for (heart disease, cancers etc)

          The government cannot make health care cheaper..heck look at student loans..
          This article makes some good point as to the system
          http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/1/

          But then again, killing and punishing poor people is always part of the free market model.

          • pz says:

            Uh… four and a half years, when you’re talking about average life expectancies for an entire nation, is a big deal. Sorry.

  20. Extended-Warranty says:

    Step 1 in getting our economy back on track is taxing internet purchases.

    The states are short billions of dollars in their budgets. One of the reasons is because of declining sales taxes revenues. To bring this revenue back, you stop the bleeding caused by laying off police officers, teachers, etc who are not only needed because of their role, but by them having jobs they have money to put back into the economy.

    Secondly, retail stores should see a slight lift in their sales because customers can’t get out of paying taxes anymore. This should stop the bleeding of retail employees feeling the hurt. I know for a fact that lots of people buy stuff online because of tax evasion.

    I know this sounds like something most of you do not want, but we NEED it. The only cost here is everyone paying a few dollars more here and there which already should have been collected in the first place.

    The argument that this is too complicated to make work is complete BS. Software can account for tax differences by jurisdiction. When have we been limited by the boundaries of technology?

    Please support the main street fairness act

    • AuntieMaim says:

      I hadn’t heard about the Main Street Fairness Act, so thanks for posting! I’m all for it.

  21. waltcoleman says:

    If government could spend itself into prosperity, every government on the planet would spend trillions and we’d all be living like kings. It doesn’t work. The only solution is business and consumer spending. And in order for that to happen, business and consumers need money to spend. That starts with tax cuts and cheap loans. Instead of wasting a trillion dollars on bank bailouts, wall street bailouts, and auto industry bailouts, government should have given the trillion to the consumers and small business.

  22. SuperNinjaâ„¢ says:

    According to THIS guy we are:

    http://www.trendsresearch.com/forecast.html

    According to him, we’re in for a “Much More Violent” Greatest Depression.

  23. thisistobehelpful says:

    We’re not at fourth yet?

  24. Master Medic: Now with more Haldol says:

    Something to consider. I used to work in the restaurant field in a large franchised system. I left the medical field for family reasons in 2001. I had a good run until March 2009 when I was laid off. I didn;t particularly want to return to medical, but alas I had applied for everything from CEO to Janitor with no success.

    Being a bit OCD I tracked all my job search activities. In 15 months I put out 1378 applications. Had 28 call backs, 9 interviews, 3 offers (in 9/09 & 1/10 & 6/10). 2 of the offers (from municipal governments) were canceled before the formal start date and the last I begin in mid July. 15.5 months of unemployment, albeit I did need to get all my certifications in order and that took 6 months. And I do have a masters degree.

    It may not be a depression from the standpoint of economic theory for everyone, but I know a lot who are married with kids in their 30’s have moved back in with parents.

  25. NumberSix says:

    You see, this is exactly the sort of thing economist need to keep to themselves. It’s this kind of doom and gloom that hurts consumer confidence and make stuff like this come true.

    Seriously. If you blow sunshine up peoples butts long enough, true or not, they’ll spend money and things will natually improve.

  26. anduin says:

    I live in Canada, jobs are still available, my parents are both working steady. They’re working less but it’s not because of the “recession”, Im only having trouble deciding where I should look for jobs.

  27. dush says:

    Won’t everyone not spending actually create a depression?
    No consumers = no customers = no sales = no revenue = no jobs = no consumers = etc…

  28. jake.valentine says:

    This lib rag article reminds of people who use a credit card for the points to use on stuff they don’t need or because the credit card deposits 1% into some bank account. This miss the point that they would have been better off saving the money in the first place.

  29. lakecountrydave says:

    I believe that we are missing a great opportunity with this depression. We should re-institute the WPA and CCC like programs and upgrade our infrastructure. Not only would we be able to regain our position as the world leader in technology, but we could also repair and upgrade our declining roads and bridges. We can simultaneously put lots of Americans back to work (directly and indirectly thus stimulating the economy, and we can ensure prosperity for decades to come. Look at how these programs helped the last time they were used. Even though the local government did not have the money to build highways and it was not profitable for private industry to bring electricity to rural areas companies for 80 years have enjoyed the markets that were opened by bringing infrastructure to rural areas. How many cars and trucks, refrigerators and frozen chicken breast have been sold in areas that to this day would not be open to businesses without the government stepping in to ensure access for businesses to the market? How much tax revenue would have been lost without these markets?