Wednesday, June 30, 2010
'Economic tsunami looming for West'
Source: Press TV
A distinguished economist has warned that the world is in for a third economic depression, arguing spending cutbacks are coming at the worst possible time for the economy.
"Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline - on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses," economist and New York Times columnist Paul Krugman wrote in a piece published on the American daily's website on June 27.
"We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost - to the world economy and, above all, to the millions of lives blighted by the absence of jobs - will nonetheless be immense," added Krugman.
Disappointed by the G-20's commitment of deficit reduction, Krugman underlined "this third depression will be primarily a failure of policy."
"Around the world - most recently at last weekend's deeply discouraging G-20 meeting - governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending," he stated.
Krugman has discussed the necessity of continuing stimulus spending at a time when the global economic recovery is weak.