On his New York Times blog, Nobel-prize winning economist Paul Krugman has reponded to a VoxEU post showing that the current Great Recession might be accelerating deeper and faster than the Great Depression. Krugman writes:
What hasn’t happened — at least not yet — is any counterpart to the catastrophes of 1931: the wave of bank runs in the US, the failure of Credit Anstalt in Austria, and the great perverse response of central banks that was triggered by the death spasms of the gold standard.
What Eichengreen-O’Rourke show, it seems to me, is that knowledge is the only thing standing between us and Great Depression 2.0. It’s only to the extent that we understand these things a bit better than our grandfathers — and that we act on that knowledge — that we have any real reason to think this time will be better.
Eichengreen and O'Rourke convincingly argue that two indicators, trade volume and stock values (they don't take on other indicators, like global GDP or unemployment), are plummeting. But they also show the alacrity and force of governmental responses -- the only option for staunching the bleeding and returning the world economy to health.
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