NYT columnist Paul Krugman schooled the government with his wrath-filled editorial last week. He invoked everything from the Great Depression to a year of grief ahead in an attempt to convince the feds that we need more stimulus than ever to keep the economy afloat.
The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.
But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.
The reason we are seeing blips of recovery, according to the Nobel-prize winning economist, is due to an “inventory bounce.” Continue reading