... things are looking really terrible, And crucially, they’re looking terrible in the wrong way, at least if you wanted to believe that political and policy debate over the past year and a half made any sense at all. We’ve been utterly preoccupied with deficits, deficits, deficits; there was supposedly a crisis looming, but a crisis that would take the form of an attack by the bond vigilantes.In 1937 FDR got convinced by the nagging right that the deficits & debt were becoming a "burden" on the country, so he decided to "get the books in order" by cutting back modestly. The US then promptly fell into a recession in the midst of the Great Depression!
And here we are, with markets now deeply worried not by deficits but by stalling growth, fearing not fiscal profligacy but fiscal austerity, and with interest rates at historic lows.
Instead of turning into Greece, we’ve turned into Japan, except much worse. And policy is replaying 1937.
The idiot Republicans are busy trying to recreate the 1937 recession. From Wikipedia:
By the spring of 1937, production, profits, and wages had regained their 1929 levels. Unemployment remained high, but it was considerably lower than the 25% rate seen in 1933. In June 1937, some of Roosevelt's advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill. The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster.The tragedy of the political right in the US is that they are ignorant of history and blind to contemporary facts because of their ideology. As Krugman says:
Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels. Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors, hourly earnings continued to rise throughout the recession, which partly compensated for the reduction in the number of hours worked. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production.
And the worst of it is that the people who got this so wrong have not and probably won’t admit to their awesome wrongness; on the contrary, they’ll dig in. And the Lesser Depression will go on and on and on.Tragedy.