Did not read the whole thread but does anyone know if Mr. Krugman has made predictions before and how many of them came true.
Why only disaster scenarios? Is it not possible the USA could live with moderate inflation to ease the repayment of debt over many years? Admittedly this does not seem like the most likely option, but I wouldn't disinclude it as a possibility.
The counterexample to Krugman's point is Asia in 1997-98. There was no stimulus at all, the banking systems collapsed totally unlike this time in the west, and the IMF forced austerity programs, yet the economies came roaring back in 99 and 2000. No long-term debt burden or double digit unemployment or deflation. If orthodox Schumpter-style creative destruction worked so well that time, and Keynesian policies failed so dismally in Japan in the last 20 years, what evidence is there that the latter are the appropriate response this time?
Answer: NONE. Keynesian policy has NEVER been shown to work in history, yet somehow inexplicably it persists, like a bad penny that just keeps coming back. I suspect it has to do with the fact that politicians and bureaucrats are more comfortable with doing it than the better options of simply doing nothing or cutting back, since spending and stimulus allows them to quell voters' cries for them to "do something", and when it doesn't work they can just blame it on the myth that they didn't spend "big" or "fast" or "long" enough...
There is going to be a severe recession/depression REGARDLESS. It will be voluntarily induced by something like current "austerity" proposals... OR it will be foisted upon us later with CATASTROPHIC effect. We should make the "lesser evil" choice if anyone cares about America's future. Obama is talking down other G20 nations' plans for austerity while he wants to continue overspending in the USA. Of course that's what he wants. It's difficult for politicians to get reelected during an economic contraction. And getting reelected is the Prime Directive for the oligarchy which runs America.
What? So if someone cashed out their bank and housing shares in 2005 instead of 2007, they were wrong to do so because they were early?
It is great to see posts from someone who so consistently seems to understand things. You must wonder why the world around you can't see what is so clear to you.
for the many who constantly point to the deflation in Japan over the past 20 years.... have these people ever been to Japan?!?!? i find it somewhat confusing that the poster child for deflation is the most expensive place on the planet for.... well.... EVERYTHING! imagine how expensive it would be if not for this never-ending 'deflation'...