“Fighting Off Depression”
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In this column, quasi-economist Paul Krugman advocates one form of government manipulation (government spending) over another (printing money). However, our current problem is the result of decades of pursuing precisely these strategies on a daily basis. Contrary to popular opinion, both printing money and government spending were carried out on a massive scale during the Great Depression, but to no avail. Similarly, both have been continuously tried for 18 years in Japan, where the economy remains dead.
Broken economies suffer from a misallocation of resources consequent upon prior government interventions and can be healed only by allowing the economy’s natural balance to be restored. Falling prices and lack of government and consumer spending are part of this process. What is spent or printed is consumed; what is not spent or printed is saved and invested in new machines and labor.
Kel Kelly @ January 14, 2009