Stay the Course
Time for some reality checks
Paul Krugman, The New York Times
Submitted by Evergreene Digest Contributing Editor Thomas Sklarski
Paul Krugman | Fred R. Conrad/The New York Times
The debate over economic policy has taken a predictable yet ominous turn: the crisis seems to be easing, and a chorus of critics is already demanding that the Federal Reserve and the Obama administration abandon their rescue efforts. For those who know their history, it’s déjà vu all over again — literally.
For this is the third time in history that a major economy has found itself in a liquidity trap, a situation in which interest-rate cuts, the conventional way to perk up the economy, have reached their limit. When this happens, unconventional measures are the only way to fight recession.
Yet such unconventional measures make the conventionally minded uncomfortable, and they keep pushing for a return to normalcy. In previous liquidity-trap episodes, policy makers gave in to these pressures far too soon, plunging the economy back into crisis. And if the critics have their way, we’ll do the same thing this time.
Related:
Green Shoots, Red Ink, Black Hole, Eliot Spitzer, Slate.com
Instead of focusing on the green shoots--dandelions, really, let's examine the macro data that will determine our national prosperity in the next generation. These data are terrifying.
