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.”