End This Depression Now! [Hardcover]

Nobel Laureate and frequent New York Times columnist Paul Krugman can come across as a Keynesian crusader. He acknowledges as much in this book, and although he includes the occasional political and professional jibe (taking more shots at the latter than the former), this excellent work should not be seen as a political text at all. End This Depression Now! delivers a timely, well reasoned and well written refutation of the call for austerity and instead an advocation of Keynesian spending as the only way to emerge from the current economic stagnation. It is a policy document based on Krugman's economic view of the world, and not a political statement. Unfortunately, it will be difficult to disaggregate the book's message from readers' own views and from the prevailing political rhetoric, and it will inevitably come across as a political document.

For what are very complex and difficult issues, even for professionals, Krugman keeps his prose chatty (he uses colloquialisms such as "stuff" and popular movie references such as "Treasure of the Sierra Madre" and "Being There") and free of buzzwords, jargon or polysyllabic economics terms. There are no formulas, except his own for success: spend to produce growth, cutback later, or risk curtailing production and employment further and for many years to come.

Written for an American audience, Krugman uses examples from Europe, the UK, and Japan, and of course the US, and draws clear links between the examples and the suggested policy actions. More specifically, he covers:
'the rise and fall of depression and Keynesian economics;
'the ins and outs of inflation and deficits (including an very clear refutation of why punitive austerity measures are counter intuitively counterproductive in today's ultra low interest rate environment);
'income inequality;
'financial deregulation;
'financial system instability (Hyman Minsky's important work); and
'how to end this depression now.

Unlike most post-crisis books, Krugman does not spend much time on the specific causes or explaining how the moving parts worked (or failed to work). Instead, he spends most of the book using evidence and dashes of theory to show broader cause and effect in economics. His central point: from the current base of zero interest rates, cutting spending will shrink economic activity further, and perhaps lower the growth rate permanently. The only solution is to spend to increase demand, cutting back later once the growth trajectory is re-established at its former level.

With his eloquent, plain language refutation of the laissez-faire "freshwater" economists' views, Krugman will no doubt raise awareness for his economic cause via a well deserved wide readership. There are, of course, equally cogent arguments by economists espousing restraint, and they too should be read. Cut through the rhetoric: buy this book and decide for yourself.

*A full executive-style summary of this book is now available at newbooksinbrief dot wordpress dot com

Since the housing and financial crash of 2008, America's economy has been stuck deep in the doldrums. Indeed, GDP has remained well beneath pre-2008 levels, and employment levels have failed to recover. In an effort to resuscitate the economy, the American government tried first to jump-start it through stimulus spending, and has now replaced this approach with greater austerity. Nothing seems to be working. For Nobel Prize winning economist Paul Krugman, though, the answer is clear: the problem is that the original stimulus effort was too small, and, since that time, the government is moving squarely in the wrong direction. Indeed, Krugman argues that America's current situation bares a striking resemblance to the stagnation of the Great Depression, and that history has taught us what to do in such situations: the government must take an aggressive approach to stimulate the economy into recovery. This is the argument that Krugman makes in his new book `End This Depression Now!'.

Now, Krugman is not a proponent of big government spending under normal conditions. Indeed, even in a recession, Krugman's preferred approach is to drop interest rates in order to spur consumer spending. The problem now is that interest rates are already at zero, and this has not been enough to get consumer spending off the ground, thus leaving the economy in what is called a `liquidity trap'. For Krugman, the liquidity trap is actually quite common in economic downturns that follow financial crashes (as is the case with the current one, and as was the case with the Great Depression), and is why such slumps tend to be deep and prolonged.

According to Krugman, the best and surest way to save an economy from a liquidity trap is for the government to step in and undertake the spending that consumers won't. That is, the government must stimulate the economy back into action, until consumers can get back on their feet enough to take over for themselves. For Krugman, this is precisely what happened in America during WWII, when the government's military spending served to stimulate the economy and save it from the grips of the Great Depression.

Now, Krugman's opponents will point out that the American government has already tried the stimulus approach during this downturn, and that this approach did not work, thus showing that it cannot be relied upon. What's more, these same opponents argue that the government's debt is already enormous, and indeed dangerously high, and that further government spending at this point may well render the debt completely unmanageable, if not force the government into insolvency (which is indeed a threat that is currently being faced by several countries in the European Union). Finally, Krugman's detractors maintain that pumping more money into the economy at this time only threatens to drive up inflation to dangerous levels, perhaps even triggering a hyperinflationary spiral.

Krugman, though, claims that he has answers to all of these objections. In the first place, as noted above, the author maintains that the failure of the government's first stimulus effort did not prove that this approach is ineffective, but that it simply wasn't large enough to do the trick. Second, Krugman argues that though government debt does pose a concern, America's debt is actually not that dangerous by historical standards. What's more, since America has its own currency (unlike the countries of the European Union), it is able to print money to turn over its debt, thus preventing the possibility of bankruptcy. Finally, with regards to inflation, Krugman maintains that inflation simply cannot get off the ground in a depressed economy (as the current situation would attest to), and that when it is triggered in an upturn the government can always reverse its policy, thus keeping it firmly in check.

Krugman does bring up some important points that do deserve to be taken into consideration in the current economic debate. Indeed, the author does seem to make the best argument that can be made in favour of the stimulus approach. However, whether his arguments are strong enough to assuage the fears over the negative consequences that additional stimulus could provoke remains to be seen. A comprehensive summary of the main arguments in Krugman's book is now available at newbooksinbrief dot wordpress dot com.

Faux-Keynesian propaganda from a state-sponsored hack.

Krugman has been consistently wrong and advocated a "alien invasion" to solve the current output gap we are now facing (due to terrible policies over decades by Central Banks and Gosverments).

Not worth your time.