September 13, 2018
Yes, we must thank The Washington Post for running Robert Samuelson. He can always be counted on to get almost everything wrong. He shows this talent yet again in his column on the financial crisis.
He gives us three lessons, with number 1 being the most important, that we could have another great worldwide Great Depression. Yes, this is true, but not because of some mysterious force descending on the world economy.
If we have another Great Depression it will be because governments and central banks refuse to act aggressively to get us out of the Great Depression. Keynes taught us the secret of getting out of a depression. It’s called “spending money.”
The problem is that people with political power, and the news outlets they own (e.g. The Washington Post), often don’t care about tens of millions of people being out of work and losing their homes. (They do care about saving the banks — see Samuelson’s lesson #3.) Therefore, they will rant about budget deficits and government debt, and the burdens we are putting on our kids, even when the most obvious burden we are putting on our kids is keeping their parents from having jobs. Samuelson, of course, is a main promulgator of this line.
We will also hear nonsense about inflation, even as the biggest concern will be an inflation rate that is too low due to the depression. We saw this most clearly with the European Central Bank where outgoing president Jean Claude Trichet patted himself on the back when he retired in 2011. Even though the euro was in crisis at that point (with several countries facing possible defaults) Trichet was proud that he had kept the inflation rate below his 2.0 percent target.
So, Samuelson is correct that we could see another worldwide Great Depression, but not because of anything inherent to the world economy. If we see one, it will be due to an incredibly incompetent and corrupt elite.
By the way, note that no one is acknowledging the role of the housing bubble, and the failure of policy people and economists to see it, in the crisis.
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