"The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience."
Although Krugman tells us that "political leaders — and all too many economists — chose to forget or ignore what they should have known," there is of course no mention of His Highness, Obama. I suppose that it has dawned on Paul that it is getting late in the game to continue blaming Bush, and he decided to leave the name of the current US president, responsible for the country with the world's largest economy, out of his discussion.
Krugman's answer to all the world's travails - yawn - spend, spend, spend. His illustrative example this time:
"For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.
So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.
At that point governments needed to step in, spending to support their economies while the private sector regained its balance."
However, as observed by Paul in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position." Well, US debt is currently more than $16.4 trillion, which is more that 100% of America's G.D.P., and those "fools" at the nonpartisan Congressional Budget Office also recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook).
Does Paul really think that debt will ever be repaid? I don't.
And when a government issues debt that is not going to be repaid, i.e. prints money, the value of all money in circulation among the American public declines.
Print ever larger amounts of money, which become worth steadily less? Also problematic, or even a recipe for disaster.
Indeed, sometimes there are no good answers.