History’s mistakes repeated

A Manifesto for Economic Sense, Paul Krugman, Princeton University, and Richard Layard, LSE Centre for Economic Performance

“More than four years after the financial crisis began, the world’s major advanced economies remain deeply depressed, in a scene all too reminiscent of the 1930s. And the reason is simple: we are relying on the same ideas that governed policy in the 1930s. These ideas, long since disproved, involve profound errors both about the causes of the crisis, its nature, and the appropriate response.

“These errors have taken deep root in public consciousness and provide the public support for the excessive austerity of current fiscal policies in many countries…”

A Manifesto for Economic Sense

The Perils of Prophecy, J. Bradford DeLong, University of California at Berkely, June 27, 2012:

…Indeed, we understood that monetarist cures were likely to prove insufficient; that sovereigns need to guarantee each others’ solvency; and that withdrawing support too soon implied enormous dangers. We knew that premature attempts to achieve long-term fiscal balance would worsen the short-term crisis – and thus be counterproductive in the long-run. And we understood that we faced the threat of a jobless recovery, owing to cyclical factors, rather than to structural changes.

On all of these issues, historically-minded economists were right. Those who said that there would be no downturn, or that recovery would be rapid, or that the economy’s real problems were structural, or that supporting the economy would produce inflation (or high short-term interest rates), or that immediate fiscal austerity would be expansionary were wrong. Not just a little wrong. Completely wrong.

Of course, we historically-minded economists are not surprised that they were wrong. We are, however, surprised at how few of them have marked their beliefs to market in any sense. On the contrary, many of them, their reputations under water, have doubled down on those beliefs, apparently in the hope that events will, for once, break their way, and that people might thus be induced to forget their abysmal forecasting track record…

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4 replies »

  1. So intertwined are political, religious, and economic dogma, especially in the USA, that change will never happen and if change doesn't happen in the USA, change doesn't happen in the rest of the world.

    Here is what will happen in the USA if:

    1) Obama wins, the US will teeter down the road of economic disaster, with the racist and revisionist Republican party and its medieval supporters hampering the Obama government at every turn. With a corrupt and partisan Supreme Court, supporting the wacky right, the USA will slowly sink into economic paralysis.

    2) If Romney wins, the USA will be thralls under neo fascist billionaires, who will reap massive profits from a religious and economic nutters who are mere puppets, running government, with the result of major economic chaos, civil unrest, and mass unemployment. The USA will crash dive into economic oblivion.

    The demise of the USA being both moral and world leaders, will rot away as the US economy will be unable to support the military largess, just like Rome, Spain, and the UK.


  2. If they keep doing the same thing, over and over and continue to expect different results, then there will really be, no changes at all. They will continue to crash headlong into a future that was predicted long ago. All empires rise and fall…usually when the money runs out or the ego's get too large.

    Do you think this will change the outcome? A psychiatrist would have a field day, with that one.


  3. Actually, if Romney wins, we have not worries as he will under orders from his master Nutty-Yahoo attack Iran's nuclear facilities with the IDF's assistance and then we will crawl out of the current depression the same way we did the last time, by benefiting from the economic stimulus that a world war provides.

    Of course there will be less people after it's over, but that's a good thing too!

    Of course Nutty-Yahoo may pre-empt everything and attack Iran in September or October in an attempt to not only protect Israel from the pretend threat that Iran poses, but to influence the US election, and causing even more jingoistic, warmongering Amuricans to vote hard right and super pro-Zion. John McCain and the senator for Israel, Joe Lieberman will both be trapped at home in the throes of spontaneous orgasms, so at least we will be spared having to see them on Sunday talk shows! Then everything will occur just as if Romney was sworn in in January 2013, just sooner! I'm gonna pump out my septic tank and move into it!


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