Paul Krugman
Nobel Laureate Economist and Op-Ed Columnist
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BRUSSELS — America has yet to achieve a full recovery from the effects of the 2008 financial crisis. Still, it seems fair to say that we’ve made up much, though by no means all, of the lost ground.
But you can’t say the same about the eurozone, where real G.D.P. per capita is still lower than it was in 2007, and 10 percent or more below where it was supposed to be by now. This is worse than Europe’s track record during the 1930s.
Why has Europe done so badly? In the past few weeks, I’ve seen a number of speeches and articles suggesting that the problem lies in the inadequacy of our economic models — that we need to rethink macroeconomic theory, which has failed to offer useful policy guidance in the crisis. But is this really the story?
No, it isn’t. It’s true that Read the Full Article
The real cause of the crisis in 2007-8 was the derivatives, not the mortgages. I was inside the mortgage business at that time and know from looking at the data that there were very few defaults at that time. The money that was destroyed by the crisis has not been replaced, and that is one of the main reasons the economy is not doing that well.
The main cause of economic malaise is the distribution of income. You can’t sell goods and services to people who don’t have money. If the middle class has been squeezed, the working class has been pushed to the brink of starvation. This is the result of off-shoring of jobs and of constant pressure on wages since the 1970’s.
The other cause of stagnation may be that we have reached the limits of growth on a finite planet. Our attempt to continue “growing” is accelerating the destruction of the biological systems we depend on for survival. In the years ahead we may well see increased war, famine, and disease as the human population is adjusted downward to the level that can be sustained.