End This Depression Now! [Formato Kindle]

End this Depression Now contains Paul Krugman's analysis and prescriptions for the crisis that has gripped America and the world since 2008. The book is very readable and accessible; Krugman is skilled at using descriptive narrative and analogies while avoiding technical jargon.

The most important aspect of the book is its focus on the on-going jobs crisis. Krugman clearly understands that, as far as most average people are concerned, access to a good job and decent wages are the most important gauge of prosperity. The book does a great job of highlighting the devastating human costs of the current unemployment crisis, especially for younger people who are just entering the job market and are unfortunately likely to feel the impact not just in the short term, but throughout their entire careers.

Krugman shows how a lack of demand for products and services is keeping us in the current depression and may ultimately cost us at least $5 Trillion (and perhaps much more) in lost productive output and earnings. He also explains the "saltwater v. freshwater" rivalry in economics and suggests that conservative economists who argue against action to revive the economy are ignoring reality and relying on a "quasi-religious" faith in markets. Next he looks at how soaring income inequality resulted in policies such as excessive deregulation of the financial industry that directly led to the crisis. There's also a section on the problems in Europe and the role a common currency has played.

Krugman argues effectively that the stimulus was insufficient and that we need more spending on infrastructure as well as more action by the Fed and revised rules to make it easier for homeowners to take advantage of low mortgage rates. As he points out, getting the economy growing and improving the job market should be our TOP PRIORITY. The best way to avoid a long term debt crisis is through economic growth. Austerity is going to make things worse, not better. (Evidence of this is already obvious in the UK economy after stringent austerity measures).

The one thing that I dislike about the book is Krugman's willingness to sweep aside any discussion of structural, technological issues in the job market. There is no doubt that today's technology is having an impact, and not just for low skilled workers. That impact will only become more important in the future.

I'd also suggest reading The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future, which looks at the increasing affect of technology and globalization on the job market and economy. Liberals are often very quick to dismiss any talk of structural employment issues because they believe (probably with justification) that conservatives will grasp onto that issue and use it as an excuse to do nothing. However, that does not have to be the case; it should be possible to have an active policy response and still incorporate an awareness of the changes occurring because of rapidly advancing technology.

Nonetheless, the cyclical issues that Krugman talks about are certainly the most important immediate term consideration, and everyone would do well to read and understand this book. This crisis does not have to continue ruining lives and destroying the prospects for our young people. We can do something about it if we have the political will.

In this book Dr. Krugman puts forth the very conventional neo-Keynesian argument for monetary and fiscal stimulus written in a non-technical manner. The intended audience is laymen. For those, even with one macroeconomic class under their belts, this book would not present anything new. It also does not discuss the causes of the current economic crises but, instead, only solutions within the neo-Keynesian framework.

Dr. Krugman's posited solution is the mainstream "middle of the road" advice that would be given by the overwhelming majority of academic and professional economists. Due to the fact that the economy is currently in what is called a "liquidity trap" (a combination of a lack demand for products and an accompanying and associated lack of demand for capital [i.e., loans]), monetary policy alone does not suffice. Even if interest rates are very low, as the currently are, as little or no sales are expected, low interest rates cannot, per se, prompt businesses to borrow and invest. Hence the need for an expansionary fiscal policy.

Dr. Krugman makes this argument well (and in terms a non-economics major can comprehend) but the book does have a number of serious weaknesses. For one, he does not make explicitly clear how much simulative spending (as a percentage of gross domestic product or otherwise) is needed. This is ironic as an important thrust of this book, if not the main one, is that there has not been enough of a stimulus.

A second major problem is that he does not discuss what form, in terms of spending, the stimulus should have to maximize its impact. The answer to this is in spending which ends up in the hands of those with relatively high marginal propensities to consume (i.e., unemployment compensation, propping up employment for state employees such as high school teachers) as opposed to spending that eventually makes its way into the hands of those with lower marginal propensities to consume (i.e., highly paid software engineers who would spend smaller percentages of money than the unemployed).

A third problem is that Dr. Krugman also does not state how long this spending has to continue other than to say when the economy is out of the recession. This sounds nice but the fact of the matter is determining this is, until well after the fact, is extremely difficult. Even Dr. Krugman would agree with this. Additionally, and related to this, is that there is no discussion of a point at which debt levels may reach which may slow down future growth. Reinhart and Rogoff, in their "This Time is Different: Eight Centuries of Financial Folly", posit that at 80% of GDP debt starts to negatively impact growth. A short academic paper and book that this book itself was based on is "decade of debt" and can be found on sale on Amazon. This reviewer has posted a short review of it for those interested.

Despite the above stated problems this reviewer still recommends this book. It provides a short succinct non-technical case for expansionary fiscal stimulus written in a manner that makes the argument accessible to laymen, unlike so many other books written on the subject.

With his latest book Nobel laureate economist Paul Krugman boldly claims that the American economy is in a depression, not a recession and that, despite protestations from politicians and fellow economists, we have the power to end this depression, but we lack the political leadership to do so. The first portion of Krugman's argument is provocative enough and certainly spurs disputation with his fellow macroeconomists. Some, like Krugman, agree that we've been in a prolonged recession since 2008 with brief periods of recovery followed by relapses. By now most everyone knows what brought on our current economic malaise: consumers became over-leveraged with debt, our government ran massive deficits, and a housing bubble was allowed to develop unchecked and subsequently burst. When the housing market crashed and we all realized how overextended we all were the economy went into an intense period of retrenchment from which we have not yet recovered. Krugman offers up a summary of the crisis in a way that lay people can understand. Macroeconomics may be boring to some, but it's not impenetrable, and Krugman walks readers through it all with concise easy to follow prose. The parallels to the Great Depression are a bit ominous to say the least, especially if you've studied that period of our history. The economists and the public of that era scarcely understood what was occurring and were uncertain how to progress. Much like our current era there were points where the economy seemed to recover. Certainly not everyone was unemployed and economic activity continued on at varying levels, just as now. And that's the scary part, the parallels between the Great Depression and now that Krugman lays out. The three legs of the economy, spending by consumers, businesses, and government, all gave out at roughly the same time. An admitted Keynesian economist, Krugman argues that government must step in to prop up the economy, even if we are carrying a burdensome debt load, and that this stimulus can only be provided so long as the economy is sluggish and until consumer and business spending recovers.

Krugman's invocation of Keynesian economic policy is likely to be the most controversial argument as macroeconomists remain divided on the wisdom of Keynesian economic policy. The massive debt racked up by the U.S. government over the past decade makes arguing for increased deficit spending a hard case to advocate for. The rise of the Tea Party and deficit hawks complicates things further. The polarization of our two party system and an unwillingness to find common cause further poisons the atmosphere. Complicating things further is the general publics and politicians general and seemingly willful ignorance of the principles of macroeconomics renders them unable to comprehend what is happening and how to respond; a situation which again mirrors the 1930s. What is truly frightening is that political leaders from Federal Reserve Chairman Paul Bernanke (a scholar on the Great Depression for heaven's sake!), to the President, to members of Congress don't seem to be able to grasp even the basics of macroeconomics and how to respond to a crisis, a theme addressed quite in Robert Draper's Do Not Ask What Good We Do: Inside the U.S. House of Representatives, which I recommend and read while reading this book. The forced austerity of Greece, the United Kingdom, Spain, Portugal, and Ireland should all point to the danger of cutting off government spending at a time when consumer and business spending have been deeply entrenched, and yet we are failing to head the warning signs. The United Kingdom's recent slide into yet another recession should be the warning sign for deficit hawks that now is not the time to cut government spending, but again that is an oversimplification. The United Kingdom has a harder time offering treasury bonds and notes in the global market, something the United States is not hampered by. The question is how long will that last?

Krugman makes points that are by turns frightening, accurate, and frustrating. Pointing out the similarities to the Great Depression is a bit frightening as we linger in the fourth year of our current economic malaise. Some may argue that hypothesis as there are certainly bright spots to our economy, but if you were to read the newspapers and histories of the 1930s you'd see the same thing occurring then. It's clear that now as then we're fumbling our way through a crisis with halfhearted measures, avoiding some of the clear mistakes of the 1930s but sadly repeating others. Readers may agree or disagree with Krugman, but at least he's consistent in his beliefs and able to articulate them in a way that is approachable and understandable. Clearly Krugman is pitching this idea with an eye on the 2012 elections. Whether his ideas resonate with voters and more importantly politicians remains to be seen. I cannot help of the Rooseveltian idea of at least trying SOMETHING to end our malaise.