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New York Times op-ed columnist and 2008 Nobel Prize winner in economics Paul Krugman has written a new book, called “End This Depression Now!” In it, he identifies the main problems with our nation’s sluggish economy, and says that Keynesian principles might be the key to jumpstarting it. We’ll talk with Krugman about what he thinks the future holds for both Wall Street and Main Street.

Guests:
Paul Krugman, author, Nobel laureate in economics, professor of economics at Princeton University and op-ed columnist for The New York Times

  • OldVet

    My sense is the Nobel Krugman is 2/3’s correct.  Yes austerity is a demand trap that will kill any economic vitality.   Yes people need some employment to be part of the future.    But no, borrowing is not the way to do it.

    Bless him for standing against the full gale of economic absurdity and counterfactualism.  Thank you! Yet can he address these quandaries: Growth vs Global warming.   Manufacturing growth does not mean job growth, for robots are what is productive.   Thus there is an income distribution problem, not a productivity problem.   And with a whorrifying political system how can we ever get a functional tax system?What is Professor Krugman’s opinion on the 21 hour work week as proposed by the new economics foundation and Juliet Schor; my suggestion for the richest country in the world made poor because it cannot share. And Finally,  Professor Krugman wants to borrow the money for his vision.   Whoa.   There is way too much ‘hot money’ aka aggregated irresponsible hedge fund and bank gambling already.   Why not build energy efficient green infrastructure with money from state banks, like Abe Lincoln’s greenbacks.  That spending creates real capital. We cannot do that through the Federal Reserve, or the Federal government (two very separate things) because the war guys will get their hands on it.  Then ever more to war we go.  It must be through state banks exemplified by North Dakota. Professor Krugman is a top economist, yes.  He is not a central banker and money creation and destruction seems beyond his ken.   No blame.   No need to be a heart surgeon and a proctologist.

  • Beth

    Has Paul Krugman who writes about economics ever started a company, run the company, met payroll and all the things running a business is all about?  Am always amazed at how many economists talk the talk but have never walked the talk as far as being in the trenches.

    • Fred

       Economics departments around the US were originally funded by the banking community. What they preach is an orthodox pseudo-religion, in which they are like saints, corporations are people, and markets are declared free even though corporations receive public handouts and other competitive advantages.

      The result is that corporate America is one large cartel that funnels wealth up to the 1% and rips off workers and consumers while disempowering voters. And the “economists” at US universities say it is all fine and normal.

      • OldVet

        Amen.    Econ has become the catechism of banker’s rationale.   The high priests of academia… to whom Presidents defer.  
        If only they were correct..

  • James R

    Questions for Paul Krugman:Can the Republicans think outside their box? They proclaim less government but never offer to privatize the USPS. Meanwhile the USPS losses billions a year and must continue Saturday delivery.If the Supreme Court strikes down the private medical insurance mandate will Congress for the first time debate single payer? For that to happen the republicans and democrates have to think outside their boxes.

  • Spring2

    Question for Professor Krugman.  How do we address the demographic aspect of the lack of demand?  As the baby boomers retire they are/will be downsizing from houses to spending.

  • Question for Mr. Krugman:

    My primary problem with most advocates of fiscal stimulus is that they fail to incorporate a reasonable monetary response function. The central bank always moves last which means that their response to fiscal policy will always matter. Many people tend to think that the Federal Reserve targets some sort of a mix of inflation, employment and growth. If fiscal stimulus works, we will be jolted out of the path that the Federal Reserve has adopted and they will tighten monetary policy (or not loosen it as much as they otherwise would have) to bring us back on that path, canceling-out the stimulus. What is the monetary response function that Mr. Krugman has in mind when he advocates fiscal stimulus?

  • Question for Mr. Krugman:

    I had to give up on your blog because I was tired of the way you fling insults at people who disagree with you. When Tyler Cowen called you on it, you replied that it’s not a dinner party and that those arguments are important. But here, you are on a network where people don’t scream at each other, don’t insult each other, display normal courtesy AND discuss important facts and issues. Have you considered asking Michael Krasny for some tips on disagreeing with people without calling them stupid?

    [Update: Perfect example: Apparently, if you call Mr. Krugman’s models crude you deserve being punched in the nose. Of course it’s a joke, but that’s still less than courteous rhetoric.]

    • Fred

       You’re saying a Nobel wasn’t never noble?

  • Question for Mr. Krugman:

    You’ve complained a lot about austerity in Europe. Somewhat recently, it has been pointed out that government spending in many countries has fallen only modestly. You responded that much of that is due to automatic stabilizers. (unemployment insurance, food stamps, etc…) Can you please explain how that is different than other forms of government spending? Brad De Long famously said in front of Congress that stimulus would work even if Congress paid people to dig holes and other people to fill them up. Do you disagree or is there something special about making people fill out forms in order to get paid as opposed to making them dig holes and filling them up?

  • Fred

    Krugman is one of those people who trusts bankers and takes banker at their word, and that eliminates him from serious consideration at the outset.

  • Discostu84

    It occurred to me when I was listening to Professor Krugman on another NPR program and from reading his blog, that this current mini depression is about transferring the problem temporally to younger generations.  Unemployment is high for young Americans and college graduates have incurred a lot of debt to get degrees and can’t find jobs to pay it off.  The people who are getting jobs are being payed lower wages.  Does Professor Krugman agree with my idea of transferring this burden to young people?  Can he ellaborate?

  • Fred

    The 1%’s lackeys in the think tanks, academia, and Congress are effective advocates of fiscal stimulus for the corporations, which receive handouts in order to keep on top and to keep the competition down. They will not give away that advantage to the 99% or to smaller companies ever. Instead they are forever seeking an austerity solution for America, which indeed they started implementing long ago with the dismantling of welfare under Clinton and before that, with the dismantling of public health services under Nixon.

  • Chrisco

    When it comes to Op-Ed Columists, Krugman is king!!!

  • Bill_Woods

    The government has been running trillion-dollar deficits for four years now. If that isn’t enough Keynesian stimulus, how much would it take?

    • OldVet

      Military spending is not stimulus, quite the reverse.   Its result is a negative product.

      • You’re obviously not a Keynesian. WWII is the textbook-example of stimulus spending.

        • OldVet

          Dear Prom.     I finally understand your objections.  You believe the textbooks.  Sorry about that.  They are not mapping the territory very well.   Where did you get the following? “Bank runs were extraordinarily rare”.   Have you not read any history of the 1800’s in banking?   What you assert there is pure falsehood on that point.
          This is not the time for any kind of economic orthodoxy, but clear thinking.  Keynes was good at that.  Read Robert Skidelsky.    and No, I do not think Laffer could find his way home in the dark.  But we are in a different economic configuration now.    As posted elsewhere, we are not lacking stuff.
          Our distribution of income system is busted because we are so flipping productive.   We are physically leveraged as well as financially leveraged and this world will become a desert if we cannot discriminate between spading with a shovel and dropping a bomb. Our income distribution is not functional.

          • I am not a Keynesian and this was not meant as an insult or slight. For some reason, I expected you to be on the same page as Krugman and I was surprised that you were not.

            ‘Where did you get the following? “Bank runs were extraordinarily rare”.   Have you not read any history of the 1800’s in banking?   What you assert there is pure falsehood on that point.’

            I misspoke. I meant that bank failures which resulted in significant losses were rare. But I also qualified my statement: Many bank failures before deposit insurance were linked to prohibitions on branch banking (which rendered diversification highly difficult and reduced competition) and requirements to hold significant quantities of non-federal sovereign debt. (Speaking in the US here)

            What I am referring to is the free banking era in Scotland during which despite a lack of deposit insurance, bank failures were rare and resulted in few losses. (Partly, people generally picked banks that were partnerships and therefore did not have the messed up incentives caused by limited liability)

            “Our distribution of income system is busted because we are so flipping productive.”

            I wouldn’t call it “busted” but yes. I agree with the diagnosis that income distribution is as it is because of productivity gains.

      • Bill_Woods

        Prof. Krugman doesn’t agree with you. He specifically cited the role of military spending in ending the Great Depression.

        • OldVet

          Dear Bill W.    Think about it.  What is the result of military expenditure in war time?  Destruction.   That is the economic product. No different than digging holes and filling them again.   With CCC they did good by investing in shovels and $30 a month per worker.   Today it costs one million a year per soldier deployed to Afghanistan. To create prosperity… there is a result from work.  A hole in the ground among goad herds half a planet away does not add benefit to the future for us, or them. Economics has a production function and a distribution function.  Military spending is poor for both.

          • You sir are most definitely no Keynesian. Digging holes and filling them up again is textbook Keynesian stimulus. You belief that the unneeded shovels were a good thing pretty much rules out ABCT and RBC. I’m going to guess some sort of supply-sider. Am I correct?

  • Realist

    It’s not just college students who can’t find jobs. Silicon Valley is full of older workers who have up to date skills and experience but have been categorically discriminated against and excluded. If I were in their shoes, I would seriously consider teaching technology skills in China and helping native companies there that have the wherewithal to compete against American firms, against the companies who shunned older Americans workers.

    • NationalPetroleumRadio

      cool, i’ll give up my friends, my culture, my civic duties and go be a second class citizen in the smoggiest place on earth to try to get a job that pays nothing by california standards… china is a mess, go there.

      • Realist

        People say Shanghai is really nice. Beijing is horrible though by all accounts.

      • worldcitizen

        When you have the skill but not wanted at home and still have financial committments to fulfill and still have the mental capacity to contribute to the society, what would you do?  Sit at home and wait for your time. No, mate!  You go somehwere esle and use your skill and work !  China is an exciting place for high tech personnel. You will be most welcome. Living condictions may not be as good as the States but livable.
        Mind you there are many retired Japanese “mould” enegineers now working in China.  

    • Noelle

       Go to ProMatch in Sunnyvale to learn the skills and for support in this brutal job market. Recovery…not quite.

  • Question for Mr. Krugman:

    You claim that Chase’s loss is a good argument for regulation? What’s wrong with them losing $2 billion? They made a mistake and they lost money. Big deal. Should we regulate losses out of existence?

    [Update: If your problem is with the bailout of JP Morgan Chase if they lose money, why not oppose bailouts rather than risk taking?]

    • OldVet

      Seems that you see no difference between a bank and a brokerage.  Back in the time of Glass-Steagall they noted that difference.  Why?
      Banks are insured by the FDIC and brokerages are not.    Is it fine with you that effective broker bets are insured by the FDIC?

      • No. It’s also not fine that banks are insured by the FDIC. I would rather let consumers pick banks that are not undercapitalized and manage their funds prudently rather than have the government try to simulate that situation.

        • Noelle

           Oh, and lose all your money like in the good old days? No thanks, I like FDIC.

          • Bank runs were extraordinarily rare, except when prohibitions on branch banking and asset class restrictions forced banks in very risky positions. (such as during the GD) When the FDIC didn’t protect consumers, banks were forced to manage assets prudently and remain sufficiently capitalized. The reason is simply that consumers didn’t give their money to just any bank. They looked for banks that were well managed. Ultimately, the FDIC allows banks to be under-capitalized and to take risky bets. After all, the ones who are supposed to keep them honest will be bailed out if the bank fails.

            Also, you may not loose all your money, but that’s just because you let others take the fall for you. I’m not sure why you should pay for my failure to exercise due diligence when selecting a bank.

  • Agnostic

    Question for Krugman:

    Why are we bailing out PRIVATE banks? I can understand bailing out PUBLIC banks, of which only one exists in the USA: Bank of North Dakota. But private banks do not operate in the public’s interest, in society’s interest. They compete with society.

    So what do you say about the idea of taking the profit motive out of banking by creating more public banks? Europe has them and one could say they are one reason why Europe is not in much worse condition.

    • SG

       Europe is not in much worse condition?  You’ve got to be kidding.  Europe is an absolute mess right now, and the increased size of their public sector is doing them no favors.  The reason banks matter (as Krugman himself pointed out in his column today) is because they are susceptible to bank runs.  If you decide to solve the problem of bank run with taxpayer dollars, there’s really no difference between bailing out private institutions vs. public institutions. 

  • Brad

    Michael,

    PK has on other occasions (C Rose, etc) recommended hiring the teachers as
    away of getting out of our recession/depression.

    Listening today as well as before, I do not hear him saying how these
    teachers are going to be paid (!?!?!?)

  • Chemist150

    So far, I’m not buying the “slam dunk” argument.  It does not seem to be well fleshed out in argument form.
     
    The inflation that we’ll need to be worried about is when the money starts flowing back.  With the great export of money through trade and borrowing, the money is being stored elsewhere.  Currently, the US dollar is dominant but trending down.  As the wages here drop/equilibrate, the playing field will equilibrate with emerging economies that have heavy investments in the US.
     
    If China worker standards (wages, compensations, insurance) rise and the US standards drop, it will allow the trade imbalance to adjust.  As faith in the US ability to pay back their bonds decline as the debt grows, the money will be put elsewhere.  It even appears that the Obama administration is playing follow the leader with dumping money into Africa even if it’s only to gain brand recognition and prevent a hegemonic market influence.  While borrowing less, the money will flow back. 
     
    What is the extent of this possibility? I’ve never heard anyone even considering it.

  • Harrymsnyder

    Are deposit insurance premiums actuarilly (sp) based, including consideration of too big to fail?

    What effect does Citizens United have on our economic policies, what are the results?harry Snyder  Mill Valley

  • Agnostic

    Dear Mr Krugman,

    What do you say about the activities of Goldman Sachs to install their own executives into political offices, and to control politicians like Obama?

    They seem to operate a bit like SPECTRE in James Bond movies, insofar as they’re everywhere, their presence is little-known, and up to very bad things.

    Goldman Sachs functionaries:

    In Europe:

    Mario Monti, Greek Prime Minister Lucas Papademos, European Central Bank Mario Draghi, Peter Sutherland

    In the USA:

    Jon S. Corzine, Larry Summers, Robert Rubin, Gary Gensler, Mitt Romney

     

  • Chemist150

    California can’t solve it’s own budget problems?

    How about building a simple causeway instead of an “iconic” bridge across the bay that ended up costing 7 times the original estimate if you can call it an estimate?

    Seriously,  there are many states with low unemployment and fiscal responsibily and if you map them by political dominance, they turn out to be very conservative.

    Please….

  • Arthur

    Our corporate profits-based tax system taxes exports but doesn’t tax imports.  A Value Added Tax taxes imports but doesn’t tax exports.  Could a version of a Value Added Tax promote manufacturing in the US, and level the playing field in our balance of trade?

  • James Ivey

    Finally, economic sanity!!  Thanks, PK!

    Everybody wants to live in a great country but nobody wants to pay their fair share to make it happen.  Undo the tax subsidies for the uber-wealthy of the Bush administration and welcome back prosperity and reduced deficits.

    • Many of us don’t think Social Security, Medicare or the vast majority of Defense spending a.k.a. most of what the US spends make this a great country.

  • NationalPetroleumRadio

     Krugman says it best. “when people talk about waste in government, mostly they don’t know what they are talking about” that is because the military waste that our military whistleblowers are talking about is buried by mainstream news outlets. LINK to their lobbying group to skip the NPR “bubble” and hear our veterans. http://www.disclosureproject.org/access/aboutexecsumm.shtml

    • Realist

       Also whistleblowers have been attacked more by the Obama junta than by any past administration.

  • Bill Jennings 9

    What do you say to the austerians that say that it takes longer for austerity to work?

  • Redski23

    My admiration for Dr Krugman is immense, so I send this nitpicking comment in a spirit of deference to his common sense and insightful attention to his knowledge of the topic at hand, but the bank run in It’s a Wonderful Life takes place before WWII on George and mary’s wedding day.

    Diana, Sunol, CA

  • Steve

    What do you say to those who argue that we have to cut government spending now because if we spend more now to solve our problems now, we won’t cut back later, and this will cause such budget deficits that it will be catastrophic to the economy over time?

  • Chemist150

    I share the caller’s sentiment of it’s not the way it used to be.

    It’s not because robots are taking jobs.  Strart tracking how many chinese directors there are.  It’s likely that you’ll find it growing because the “technology that is taking our jobs” is chinese outsourcing because of labor practices there make the FTE’s cheaper and they have the technological know how.

  • Lehman Brother may have cause systemic problems, but that’s because there was an expectation of a bailout. If people didn’t expect bailouts, they would take steps to insulate themselves from big bank failures and systemic propagation would be much less likely.

  • Carol guest

    If President Obama earns $400,000, then why are the Superintendents of Schools earning close to that amount?  

  • Lynn

    I own a recruitment company in Northern California. We have thousands of open positions for software engineers, that can’t be filled by local employees because they haven’t been well prepared academically. You say that school teachers are the emblematic public employee. I would argue that in order for us to change our future that school teachers be considered and paid dramatically differently than electricians, plumbers, and groundskeepers. They have to complete a university degree plus a teacher’s credential, and then lead a group of 20-30 children every day. Their pension programs are also way below many other non-professional state employees. Paying teachers better while addressing the ridiculous pay and pensions for other employees in the state before asking for a tax increase is the way to go. I know that when you pay people better, you get better employees. Then beef up math and science programs and you will see California thrive again.

    • Realist

       I’ve dealt with headhunters a bit myself. It never fails that the headhunter sets me up in a job where the full-time dunces have royally screwed up, necessitating bringing me in as management’s quasi mercenary to fix things. But in the end, they get rid of me, and keep the dunces, who are “corporate types”.

  • OldVet

    My impression of Professor Paul Krugman plummeted as a result of this interview.   He said “We are not living beyond our means, we are not producing up to our capacity.”   Then he talks about money, not btu, watts and global warming.   We have plenty of stuff, of food, but broken income distribution.
    We no longer have huge factory employment nor will we.  2% of us (actually Mexicans) produce 100% of our food.    We need not rape to planet in order to  have something to trade to get some.
    He also said that “technology does not reduce employment”   True Only if you expand your appetite for new stuff.  Otherwise: flat wrong.
    Economists who cannot factor in global warming are blind to the ‘long run’.
    Blind.

  • Paul Krugman is great.

  • Noelle

    Finally, someone telling it like it is:The Lesser Depression.
    I left my job 2 years ago and thought I would easily get another one with my skills. I was wrong.

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