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But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
How'd that work out?
More Krugman:
More broadly, if our economy has a persistent tendency toward depression, we’re going to be living under the looking-glass rules of depression economics — in which virtue is vice and prudence is folly, in which attempts to save more (including attempts to reduce budget deficits) make everyone worse off — for a long time.
I know that many people just hate this kind of talk. It offends their sense of rightness, indeed their sense of morality. Economics is supposed to be about making hard choices (at other people’s expense, naturally). It’s not supposed to be about persuading people to spend more.
But as Mr. Summers said, the crisis “is not over until it is over†— and economic reality is what it is. And what that reality appears to be right now is one in which depression rules will apply for a very long time.
I know that many people just hate this kind of talk. It offends their sense of rightness, indeed their sense of morality. Economics is supposed to be about making hard choices (at other people’s expense, naturally). It’s not supposed to be about persuading people to spend more.
But as Mr. Summers said, the crisis “is not over until it is over†— and economic reality is what it is. And what that reality appears to be right now is one in which depression rules will apply for a very long time.
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