Towards A Good Samaritan World

Tuesday, May 24, 2005

Paul Krugman thinks we're headed for a depression:

Everyone loves historical analogies. Here's my thought: maybe 2004 was 1928. During the 1920's, the national government followed doctrinaire conservative policies, but reformist policies that presaged the New Deal were already bubbling up in the states... the coming of the New Deal was hastened by a severe national depression. Strange to say, we may be working on that, too.

Where does Paul Krugman get these ideas? The economy grew at a respectable 3.6% in the first quarter of 2005, making 14 consecutive quarters of growth, and eight consecutive quarters in which the economy has grown at at least a 3% annual rate. The dollar is getting stronger. The economy created 274,000 jobs in April, beating expectations. In March there was even an unexpected fall in the trade deficit. Unemployment is 5.2%, just a bit above the full employment rate. There was even an unexpected bounce in tax receipts. All the signs are pointing in a good direction! To forecast a recession right now would be bizarre enough. But to forecast a depression is really unworthy of an eminent economist.


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