Considering that his Keynesianism has basically destroyed Japan's future (while at the same time he faults them for not borrowing enough) I'd hope he'd proceed with a bit more caution. The basic problem he has is that he doesn't really understand why we're here. When debt chases bad assets it's a disease that has to be cleared.<p>He ignored some pretty serious depressions in his analysis as well. The panic of 1819 comes to mind as a pretty serious one. People ignored the desires of those long on stocks and real estate to bail them out. They realized the problem was too much debt and just let it work itself out despite the pain it caused them in the short run.<p>Then there is the depression of 1920-21. This depression probably highlights most clearly the Austrian theory of the business cycle and why the Austrian response to the bust is the correct one. There were no interventions in the economy following the bust. It was a very serious contraction by any definition.<p>We live in a world that's consumed by debt. We're taught that debt is good despite our instincts to the contrary. We're taught that being irresponsible is the way to get yourself out of short term pain. Listening to these people seems like madness at this point. The real reason that budget cuts are on the table is that everyone knows we're all broke. After 10 years of this I imagine people are going to get fed up with bailouts and inflation. Krugman will still be crying for more stimulus while a few people might get serious enough to let the banks fail and start over.<p>Our fear of short term pain might be the worst part of the modern political system. We'd rather avoid some of the short term pain even if that means dragging things out for decades.
I suspect the real problem is the evaporation of superficial jobs. We have become a nation devoted to our wants, but when things look bad people quickly cut back on such things. A tiny fraction of our population are "farmers" but with the over abundance of food produced and the only way to make money is to either suck on the governments subsidies or create specialty <i>locally grown, free range, Organic etc</i> goods.<p>I think only long term way to get out of chronic high levels of unemployment is to either accept we are going to live in a welfare state, or remove the minimum wage.
I click the article. I see it's Krugman. Before I read further, I say, "Ah, Krugman. I bet his solution is to print money."<p>> ...governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.<p>That's Krugman's answer for everything. Dot-com crash? Create more money:<p>2001 Krugman: “During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn’t you lower interest rates?”<p>Oh, wait, they did that and that created the housing bubble that he's now suggesting we prop up by... creating more money.<p>This quote from the article is even crazier:<p>> But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.<p>Balanced-budget orthodoxy? Man, the guy's got huge cojones, at least. When your policy causes problems, insist it on even louder as the solution, and point to classical common sense ("balance revenues and spending") as orthodoxy. Good economics, not so much, but huge cojones definitely. Startup founders could do worse than emulating his confidence when pitching investors.
I often wonder why more engineers don't get into economics. It is a control system and would be well suited to engineering graduates with expertise in control systems.
Related article from this morning's reading: <a href="http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html" rel="nofollow">http://www.telegraph.co.uk/finance/comment/ambroseevans_prit...</a>
America is saturated and inhabited by people who will live on <a href="http://en.wikipedia.org/wiki/Passive_income" rel="nofollow">http://en.wikipedia.org/wiki/Passive_income</a>
We're certainly in a great depression already - with real unemployment close to 20% (shadowstats.com), most of our states having greece-like deficits, people losing 50%+ wealth from the market/real estate crash. We don't see soup lines because we have food stamps and unemployment checks mailed to our home and deposited right into our bank account .<p>And it's only the beginning. Global austerity is here (except US and Japan is fighting valiantly to steal more honest work from its people via printing). World's biggest consumer, the boomers, are retiring. Automation/Software will keep reducing jobs permanently.<p>The ancillary point is, boostrap your startup wisely. Hire smartly. Don't spent money on things unless you have to. Don't take money. Keep control of your company.