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The Return of Depression Economics and the Crisis of 2008 Essay examples

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In The Return of Depression Economics and the Crisis of 2008, Paul Krugman warns us that America’s gloomy future might parallel those of other countries. Like diseases that are making a stronger, more resistant comeback, the causes of the Great Depression are looming ahead and much more probable now after the great housing bubble in 2002. In his new and revised book, he emphasizes even more on the busts of Japan and the crises in Latin America (i.e: Argentina), and explains how and why several specific events--recessions, inflationary spiraling, currency devaluations--happened in many countries. Although he still does not give us any solid options or specific steps to take to save America other than those proposed by other economists, he thoroughly examines international policies and coherently explains to us average citizens how the world is globalizing--that the world is becoming flatter and countries are now even more dependent on each other.
The main ideas in Krugman’s book revolve around the “Keynesian Compact” or the “neoclassical consensus”. Krugman suggests five general solutions based on the economist, John Maynard Keynes’ theories: put more capital into the banking system to unfreeze the markets, make a program for the government to lend money, work hand-in-hand with other countries, use government stimulus plans, reform and regulate the capitalistic market system.
Just as John Stuart Mill did in the Principles of Political Economy, Paul Krugman in The Return of Depression Economics and the Crisis of 2008 felt that the government should not only help American businesses gain profits, but also play a major role in protecting the people against big businesses and moguls. Krugman believes that the average citizen cann...


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...flation. The big possibility that corporations will fight the inflation by increasing prices and wages and thereby increasing the cost of supplies will detract from the demand-side advantages. As a result, Krugman strongly calls for governments of all countries, including America, to moderate their economy quietly without decreasing confidence and triggering or risking expectations in the general population. Governments should try to make their changes as natural and as low-key as possible, especially in the case in which the plan does not work because then the confidence of the nation will spiral downwards even faster. This idea of “arcane imperii” is also very Keynesian of Krugman. Krugman is hoping that the advantages to the government’s playing with inflation will be greater than the consequences in the supply side and the risks in moderating inflation.






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