More On The Economy

Paul Krugman is my favorite economist because he is one of the few who doesn't have his head stuck up the rightwing a-hole. And he really is a well known and highly respected economist. Check out his bio at the NY Times from which this is just a small piece:

Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as professor of Economics and International Affairs at Princeton University.

Mr. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics.

He's a heavyweight in the field. And he said something today on the Rachel Maddow show that scared me and made me realize what I forgot to mention yesterday in my post on the economy; namely, that we could be heading for another Great Depression just as bad, if not worse as in 1932. This is something I've worried about for years because anyone who knows even a little bit about the economy and what the idiot Republicans were doing to it were worried. Another Great Depression is, of course, the worst of all possible outcomes so I always thought it wasn't too likely (I hoped). But Krugman said today that if the Fed hadn't bailed out AIG we might have been only days away for a GD. Days. This from his blog 2 days ago:

And there’s a lesson there for those ready to hear it: government takeovers may be the only way to get the financial system working again.

Some people have been making that argument for some time. Most recently, Paul Volcker, the former Fed chairman, and two other veterans of past financial crises published an op-ed in The Wall Street Journal declaring that the only way to avoid “the mother of all credit contractions” is to create a new government agency to “buy up the troubled paper” — that is, to have taxpayers take over the bad assets created by the bursting of the housing and credit bubbles. Coming from Mr. Volcker, that proposal has serious credibility.

If everyone loses faith in the ability of banks to borrow money then the whole system comes crashing down because all credit will end which will bring most business to a halt and put all of us out of work. In 1932 they had an unemployment rate of 24%, we could see that again.

So what do we have going on here? We can now proudly proclaim ourselves a socialist country in the style of Europe. That's what Republicanism has done for us. But we aren't out of the woods yet. Krugman says he wants to know the details of what the the Fed, SEC and Congress are cooking up to see if it will do what it needs to do, and hopefully without the CEO's and stockholders of failed companies walking away with millions.