The Return of Depression Economics and The Crisis of 2008

Through simple language and basic analogies, Krugman manages the great feat of explaining how money works in a vacuum, and how it has worked for us in the past 20 years.

The Return of Depression Economics and the Crisis of 2008

Publisher: W.W Norton
Length: 224
Author: Paul Krugman
Price: $16.95
Format: Paperback (reprint)
Publication date: 2009-08

A bank, Krugman alerts his readers in the later phases of The Return of Depression Economics, is not just a building with the letters FDIC on the outside. Krugman goes on to patiently explain the component parts of banking institutions so that his non-economically inclined readers can understand the principles of lending and currency control (even if they do a feel bit patronized). Still, it's light-hearted remarks like this that make this book something that everyone can read, assuming that 191 pages of economic disaster stories do not induce any kind of severe panic reaction.

Krugman happens to be quite adept at describing economic panic, or perhaps more importantly, the government's refusal to panic that often leads to the demise of an economy. The underlying theme of the book is that economists and policy makers had the hubris to believe they had finally conquered the capitalist beast.

The first chapter of the book is called, "The Central Problem Has Been Solved" and Krugman explains that "by the late 1990s it seemed safe to say that the business cycle, if it had been eliminated, had at least been decisively tamed." It was that belief that led Alan Greenspan to make the mistakes that he did, and it was that belief that blinded the United States to the lessons that might be learned from crises in other countries.

In fact, the '90s were a period of tremendous difficulty for many countries world-wide. Krugman tells the stories of each of these countries in order illustrate how the current economic climate came to be.

Primarily, Krugman cites the economic crisis in Mexico and Latin America as situations that should have served as a warning to the United States. Ultimately, the US was able to bail out Mexico, leading to the incorrect assumption that an influx of money was an easy and reliable way to rescue an economy. He argues that although these countries indicated the return of depression era economics, we were unwilling to believe that there would ever be another depression.

Thus, obvious warning signs failed to gel in the minds of our leaders. He goes on to describe the financial crisis in Japan and the big crash in Asia, systematically illustrating what we could have learned, but did not.

After he has fully described the relevant global economies, he elucidates the policies, practices and institutions that inadvertently allowed them to crumble. His book operates on many levels, and thus can be appreciated by anyone with an curiosity about how money works on the big scale, or how the stage was set for the current recession. In particular, the chapter on hedge funds, aptly titled "Masters of the Universe", is revelatory.

Of course, if you already know what short selling is, you might feel that some of the information is repetitive, but Krugman still shows a side of these funds that it not widely discussed. In fact, the way these funds work legally doesn't seem that far off from the schemes of Bernie Madoff. They are designed to function with numerous opportunities for loopholes.

And Krugman's main argument seems to be that everyone thought breaking the rules was acceptable because the capitalist system was basically infallible. Throughout the book, he illustrates the many factors that contributed to this belief, and simultaneously proves what we have learned in the past year: Economists cannot really predict the future than philosophers can.

That said, there seems a benefit to transmitting the knowledge and practices of experts and decision-makers to the lay-people. The book does just that: through simple language and basic analogies, Krugman manages the great feat of explaining how money works in a vacuum, and how it has worked for us in the past 20 years. Not only can he come up with creative explanations such as using a Washington D.C baby-sitting co-op that explains inflation and recession, but he also has a gift for story-telling. He conveys the history of economic with the dramatic tension of a novel.

Perhaps we should be alarmed that there is such a neat and tidy plot arc to our mistakes. One can only hope that as entertaining as his writing is, his observations will lead to greater action. However, is past is prologue, they probably won't.





The Top 20 Punk Protest Songs for July 4th

As punk music history verifies, American citizenry are not all shiny, happy people. These 20 songs reflect the other side of patriotism -- free speech brandished by the brave and uncouth.


90 Years on 'Olivia' Remains a Classic of Lesbian Literature

It's good that we have our happy LGBTQ stories today, but it's also important to appreciate and understand the daunting depths of feeling that a love repressed can produce. In Dorothy Strachey's case, it produced the masterful Olivia.


Indie Rocker Alpha Cat Presents 'Live at Vox Pop' (album stream)

A raw live set from Brooklyn in the summer of 2005 found Alpha Cat returning to the stage after personal tumult. Sales benefit organizations seeking to end discrimination toward those seeking help with mental health issues.

Love in the Time of Coronavirus

‘The Avengers’ Offer a Lesson for Our Time of COVID-19

Whereas the heroes in Avengers: Endgame stew for five years, our grief has barely taken us to the after-credit sequence. Someone page Captain Marvel, please.


Between the Grooves of Nirvana's 'Nevermind'

Our writers undertake a track-by-track analysis of the most celebrated album of the 1990s: Nirvana's Nevermind. From the surprise hit that brought grunge to the masses, to the hidden cacophonous noise-fest that may not even be on your copy of the record, it's all here.


Deeper Graves Arrives via 'Open Roads' (album stream)

Chrome Waves, ex-Nachtmystium man Jeff Wilson offers up solo debut, Open Roads, featuring dark and remarkable sounds in tune with Sisters of Mercy and Bauhaus.

Featured: Top of Home Page

The 50 Best Albums of 2020 So Far

Even in the coronavirus-shortened record release schedule of 2020, the year has offered a mountainous feast of sublime music. The 50 best albums of 2020 so far are an eclectic and increasingly "woke" bunch.


First Tragedy, Then Farce, Then What?

Riffing off Marx's riff on Hegel on history, art historian and critic Hal Foster contemplates political culture and cultural politics in the age of Donald Trump in What Comes After Farce?


HAIM Create Their Best Album with 'Women in Music Pt. III'

On Women in Music Pt. III, HAIM are done pretending and ready to be themselves. By learning to embrace the power in their weakest points, the group have created their best work to date.


Amnesia Scanner's 'Tearless' Aesthetically Maps the Failing Anthropocene

Amnesia Scanner's Tearless aesthetically maps the failing Anthropocene through its globally connected features and experimental mesh of deconstructed club, reggaeton, and metalcore.


How Lasting Is the Legacy of the Live 8 Charity Concert?

A voyage to the bottom of a T-shirt drawer prompts a look back at a major event in the history of celebrity charity concerts, 2005's Live 8, Philadelphia.


Jessie Ware Embraces Her Club Culture Roots on Rapturous 'What's Your Pleasure?'

British diva Jessie Ware cooks up a glittery collection of hedonistic disco tracks and delivers one of the year's best records with What's Your Pleasure.

Collapse Expand Reviews

Collapse Expand Features
PM Picks
Collapse Expand Pm Picks

© 1999-2020 All rights reserved.
PopMatters is wholly independent, women-owned and operated.