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Sunday, November 17, 2013

Paul Krugman, "A Permanent Slump?": America Sells Its Economic Future for a Bowl of Wonton Soup

In his latest New York Times op-ed entitled "A Permanent Slump?" (, Paul Krugman observes that a growing number of economists believe that "depression-like conditions are on track to persist, not for another year or two, but for decades," and that such opinions have "moved into the mainstream." Krugman provides his own support for this dismal outlook:

"Look at household debt relative to income. That ratio was roughly stable from 1960 to 1985, but rose rapidly and inexorably from 1985 to 2007, when crisis struck. Yet even with households going ever deeper into debt, the economy’s performance over the period as a whole was mediocre at best, and demand showed no sign of running ahead of supply. Looking forward, we obviously can’t go back to the days of ever-rising debt. Yet that means weaker consumer demand — and without that demand, how are we supposed to return to full employment?"

Regrettably, I share this grim view.

As recently reported by the US Commerce Department (see:, imports increased to their highest level in 10 months in September while exports dropped, notwithstanding an 11.5 percent decline in petroleum imports. Significantly, the deficit with China reached an all-time high of $30.5 billion.

Does the US economy, specifically growth in employment, benefit from consumer demand fueled by easy money? Obviously not.

For there to be more American jobs, the trade imbalance with China needs to rectified.

1 comment:

  1. How interesting ...
    Obama is losing people. The most recent critique comes from someone whom I like (?) or at least liked very much in the past - Thom Hartmann. I stopped listening to him a long time ago, for a variety of reasons, including his, or more correctly the Democratic support of Obama, whom I despised from day one (yes, I am intelligent). So I have no idea what he was up in the last 5-6 years.
    Now, Thom accuses Obama of ... treason, economic treason. He does it probably from his progressive perspective, but the fact is that most people sense that there is someone profoundly dishonest (?), non-genuine (?), etc. in the White House and that this presence is damaging America.