Paul Krugman:The Halt and the Lame

[cal04]

http://krugman.blogs.nytimes.com/2011/07/28/the-halt-and-the-lame/?smid=tw-NytimesKrugman&seid=auto

Simon Johnson writes about who’s worse — America or Europe? Basically I agree with his assessment: Europe has more fundamental problems in sheer economic terms, because it adopted a single currency without the necessary institutions to make it workable. America has a long-run budget problem, but our current mess is entirely political. Unfortunately, that doesn’t make it any easier to solve.

What’s extraordinary, though, is the paralysis that has taken over essentially the entire advanced world. America is hamstrung by its crazy right; Europe by its single currency that can be neither abandoned nor accompanied by sufficient reforms to make it work; Japan by lousy demography and monetary timidity that is now deeply ingrained in expectations.

Technology continues to advance; resource shortages are not severe enough to pose a major constraint; climate change is terrifying in its long-run implications, but hasn’t inflicted much damage yet. The only major problem we have right now is the one that was supposed to be easy to solve: a simple lack of adequate demand. And we’re totally failing in our response.

[existentialist]

1. There is little economic "demand" because

the majority of people have few resources (little cash) to translate their felt needs into economic "demand."

Some one that wants (or even desperately needs) something creates no economic "demand for that product unless (s)he can bid for the items (s)he wants.

[eomer]

2. Right, and from the start Krugman has advocated stimulus spending to put cash into those hands. n/t

[existentialist]

3. OK, but that cannot do any long term good without

substantial tax increases on corporations and the wealthy.

Without that we remain on an untenable borrow and spend cycle.