end this depression now! - paul krugman

[...]... year; but the co-op as a whole couldn’t, since babysitting time can’t be stored So there would have been a fundamental contradiction between what individual couples were trying to do and what was possible at the co-op-wide level: collectively, the co-op’s members couldn’t spend less than their income Again, this comes back to the fundamental point that my spending is your income and your spending is my... co-op no matter how liberal the coupon policy That’s more or less what has happened to America and the world economy as a whole When everyone suddenly decided that debt levels were too high, debtors were forced to spend less, but creditors weren’t willing to spend more, and the result has been a depression not a Great Depression, but a depression all the same Yet surely there must be ways to fix this. .. this But that’s not all Our short-run problems—if you can call a slump now in its fifth year “short-run”—are hurting our long-run prospects too, through multiple channels I’ve already mentioned a couple of those channels One is the corrosive effect of long-term unemployment: if workers who have been jobless for extended periods come to be seen as unemployable, that’s a long-term reduction in the economy’s... don’t give up: we can end this depression, if we can only find the clarity and the will CHAPTER TWO DEPRESSION ECONOMICS The world has been slow to realise that we are living this year in the shadow of one of the greatest economic catastrophes of modern history But now that the man in the street has become aware of what is happening, he, not knowing the why and wherefore, is as full to-day of what may... earn coupons through babysitting became scarce This made coupon-poor couples even more reluctant to go out, and the volume of babysitting in the co-op fell sharply In short, the babysitting co-op fell into a depression, which lasted until the economists in the group managed to persuade the board to increase the supply of coupons What do we learn from this story? If you say “nothing,” because it seems... possibility When coupon-short members of the babysitting co-op decided to stop spending coupons on nights out, that decision didn’t lead to any automatic offsetting rise in spending by other co-op members; on the contrary, the reduced availability of babysitting opportunities made everyone spend less People like Brian Riedl are right that spending must always equal income: the number of babysitting... either unemployed or working only part-time There has also been a notable drop in wages for those who do have full-time jobs, probably because many of them have had to take low-paying jobs that don’t make use of their education One more thing: there has been a sharp increase in the number of Americans aged between twenty-four and thirty-four living with their parents This doesn’t represent a sudden rush... will, at best, mean getting back to its old trend line, not making up for all the years it spent below that trend line I say “at best” advisedly, because there are good reasons to believe that the prolonged weakness of the economy will take a toll on its long-run potential Losing the Future Amid all the excuses you hear for not taking action to end this depression, one refrain is repeated constantly... up from just 700,000 before the crisis This is something almost completely new in American experience—I say almost completely, because long-term unemployment was obviously rife during the Great Depression But there’s been nothing like this since Not since the 1930s have so many Americans found themselves seemingly trapped in a permanent state of joblessness Long-term unemployment is deeply demoralizing... babysitting co-op, for all its simplicity and tiny scale, had this crucial, not at all obvious feature that’s also true of the world economy, the co-op’s experiences can serve as “proof of concept” for some important economic ideas In this case, we learn at least three important lessons First, we learn that an overall inadequate level of demand is indeed a real possibility When coupon-short members . Will Take Thirteen End This Depression! Postscript What Do We Really Know about the Effects of Government Spending? Acknowledgments Index INTRODUCTION WHAT DO WE DO NOW? THIS IS A BOOK about. between twenty-four and thirty-four living with their parents. This doesn’t represent a sudden rush of filial devotion; it represents a radical reduction in opportunities to leave the nest. This situation. weakness of the economy will take a toll on its long-run potential. Losing the Future Amid all the excuses you hear for not taking action to end this depression, one refrain is repeated constantly