Friday, 26 October 2012

Did this depression end now?

Just finished End This Depression Now! by Paul Krugman. He's a Nobel Prize-winning economist, and an Op-Ed columnist at the New York Times, where he writes on economics and politics.

Taking jobs as the best guide, indicator and cause of prosperity, he firstly debunks ideas around austerity, explaining the liquidity trap along the way. From Wikipedia (yeah, my economics knowledge stretches that far):
"A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war."
He then resolves to set out a plan to sort things out. From the book:
"We could give the economy a boost just by reversing the destructive austerity that has already been imposed by state and local governments... And it could be done quickly, since we're talking only about restoring cuts rather than about initiating new projects."
Interesting reading, especially in light of yesterday's tentative growth statement in the UK.

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