17 of 17 people found the following review helpful
5.0 out of 5 stars Provides great intuition for macroeconomics
For anyone wishing to read one single book about macroeconomics, this is the one. Apart from providing fundamental insights into the current crisis, the book explains the dynamics of macroeconomics in the most enlightening and entertaining way I have seen so far. As a doctorate student of economics, I would recommend this book both to other economists, for the intuition...
Published on 9 May 2009 by Economics student
2 of 2 people found the following review helpful
3.0 out of 5 stars Complex
I've been casually reading around economics for the last couple of weeks, in the hopes of trying to understand the economic crisis of 2008. So I bought this book thinking it would explain, in layman's terms, what had happened. I wasn't entirely sure what to expect from the book but I have to say I was disappointed.
The section devoted to the economic crisis of...
Published 16 months ago by S
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17 of 17 people found the following review helpful
5.0 out of 5 stars Provides great intuition for macroeconomics,
This review is from: The Return of Depression Economics (Paperback)For anyone wishing to read one single book about macroeconomics, this is the one. Apart from providing fundamental insights into the current crisis, the book explains the dynamics of macroeconomics in the most enlightening and entertaining way I have seen so far. As a doctorate student of economics, I would recommend this book both to other economists, for the intuition it offers, and to non-economists, as a great and very topical introduction to the field of macroeconomics.
9 of 9 people found the following review helpful
4.0 out of 5 stars Up there with the best popular writers,
This review is from: The Return of Depression Economics (Paperback)Krugman doesn't just make economics accessible to the layman but also provides his own unique insights, in this case to the global economic crisis we're currently in. He also has his own, idiosynchratically exciting way of explaining concepts. You will find differences with other accounts, such as Stiglitz's (whom I greatly admire and am more keen to agree with), which is good, because it provides more food for thought and challenge to the orthodoxy. If you are interested in the global economic state of affairs, you will greatly appreciate this work.
11 of 12 people found the following review helpful
4.0 out of 5 stars Depressed about economics?,
This review is from: The Return of Depression Economics (Paperback)Dr. Paul Krugman writes a regular column for the New York Times, so those familiar with his column will find this book familiar - and his analysis and solutions easy to understand and brilliant.
Essentially, Krugman proves - through countless examples - how the demand side (government intervention) has rescued the supply side (banking and industry) over the last century. Yet the uniformed or idiotic right wing (can you separate them?) either deny the facts, don't know them or are 'ideologically' opposed to them. This book originally focused on the Latin American and Asian banking crises but has been expanded to deal with the onset of the great 2007-8 disaster we are still living with.
Krugman has consistently advocated massive public capital infusion (about 4% of GDP in the US) to lift the economy (the US actually put in less than half, a figure Krugman long predicted would be insufficient) and a new regulatory set up for the Non-bank banking sector (hedge funds, etc.) which never happened.
The Obama administration was too timid to enact a real Keynesian push (opposed by the right wing Republicans and scared Democrats) and the current Tory lead government is producing precisely the wrong program (refuted countless times in this slim volume) for recovery.
It was Gordon Brown, Alistair Darling and Ed Balls who were on the right path, but did not explain to the 'great British public' why the UK deficit had to balloon in the short term to stave off depression. Of course, the public punished Brown for saving the British economy, and swallowed whole the Conservative's version of events, believing that we should punish ordinary citizens for the excesses of the few (who are, of course, all richer as a result of the crisis). Ed Balls regularly refers to Krugman, and rightly so - he is a beacon of clarity in these dark days.
Read Krugman as a first step to seeing what macro-economists really know about what starts and how to contain, economic crises.
3 of 3 people found the following review helpful
4.0 out of 5 stars A surprisingly good read,
This review is from: The Return of Depression Economics (Paperback)It used to be that banks just did not fail. Well we all knew that some had failed in 1929, but banks did not fail in modern times in modern countries. This is a smart book, lightly updated to reflect recent events.
How much you get out of the book will depend on your aptitude for macroeconomics, I know a bit and feel that I got most of it, but certainly not all. However it was consistently enjoyable and readable. I never felt that I was being talked down to. I might re-read just to get my head round some more of it.
If you are looking for a book that will tell you what shares to invest in, or how to make money investing in the next few years, then this is not much help. After reading it you might even want to start stockpiling bottled water. But if you want to start getting your head round what is happening, then this could well be the best book to read.
At the end of the day, we just don't know what will happen, this book won't tell you, but getting some perspective cannot do any harm.
Random Quote - "A note about intellectual style: one temptation that often afflicts writers on economics, especially when the subject is grave, is the tendency to become excessively dignified. Not that the events we are concerned with aren't important, in some cases matters of life and death. Too often, though, pundits imagine that because the subject is serious, it must be approached solemnly: that because these are big issues, they must be addressed with big words; no informality or levity allowed. As it turns out, however, to make sense of a strange phenomena, one must be prepared to play with ideas." p7
2 of 2 people found the following review helpful
3.0 out of 5 stars Complex,
This review is from: The Return of Depression Economics (Paperback)I've been casually reading around economics for the last couple of weeks, in the hopes of trying to understand the economic crisis of 2008. So I bought this book thinking it would explain, in layman's terms, what had happened. I wasn't entirely sure what to expect from the book but I have to say I was disappointed.
The section devoted to the economic crisis of 2008 is disappointingly small, only a couple of chapters. The rest of the book being devoted to previous recessions and depressions worldwide, such as the Asian crises of the 1990s and the Latin American crises. The explanations seemed to be good enough, but there was a lot more econo-babble than I would have hoped for, and though the author tries to put complicated economical concepts into tangible, real-world examples, even then it's still pretty complicated.
To cut a long story short, the main argument that I can glean from this book is that "speculation" (whatever that may be; irritatingly, it's never made entirely clear in the book) is a bad thing, and causes recessions. So I think the book's section dealing with the 2008 crisis is far too short, there's too much economics jargon and the real-world examples, though admirable, don't quite get it. I think, however, my lack of economics knowledge didn't help matters but I do not feel this should be an issue with a text that seems to promise to make things easy for the non-specialist.
2 of 2 people found the following review helpful
4.0 out of 5 stars Excellent Analysis of the current situation, light on solutions,
This review is from: The Return of Depression Economics (Paperback)I liked the style of this book, Krugman is a good teacher and in his run-through of financial disasters both old and new he has a sure touch. His use of a baby sitting circle to demonstrate liquidity problems is inspired and this is a good read with lots of information.
The only problem is in the last chapter where he maintains that the heart of the problem is that we haven't concentrated on the supply side of the economic situation. I'm not sure what he means here, as far as I can see the supply side had been part of the problem, and he's not clear what his prescription would mean.
Other than that this is a fine book, readable and timely - I see he was warning about deflationary problems way back in 1999.
6 of 7 people found the following review helpful
5.0 out of 5 stars There IS a free lunch,
This review is from: The Return of Depression Economics (Paperback)In this book Paul Krugman analyzes the economic and financial crises from the 1980s on in Japan, Mexico, Argentina, Thailand and the US. He clearly points his finger at the lessons to be learnt and gives on a plate the evident solutions to clear up the mess and to put the world economy on a stable growth path again.
From the 1980s on, capitalism ruled the world unchallenged. But, its greatest enemies are as always, wars and depressions (`the Great Depression in the US in the 1930s came close to destroying both capitalism and democracy and led more or less directly to war.') `The Great Depression was brought to an end by a massive deficit-financed public works program, known as World War II.'
The Asian and Latin-American crises showed the dangers of foreign currency debts (countries are completely dependent on the goodwill of foreign investors), of use and abuse of the printing press (inflation), of rigid exchange rate systems, of cronyism and of economic policies based on `political connections'. Loss of market confidence led to self-fulfilling speculations and self-fulfilling economic panics.
In Japan, the main reason for the economic slump was a real estate bubble.
For Paul Krugman, the main culprit for the debacle in the US was the shadow banking system (not regulated non-bank banks) and the unacceptable risks these corporations took while betting on the concept of moral hazard (heads I win - the private investor, tails you lose - the government = the tax payers).
Actually we are confronted with failures on the demand side (insufficient private spending) together with a credit crunch. Through real and massive Keynesian anti-depression policies (public works), spending should be propped up and credit should be flowing again.
There is a real free lunch available because there are unemployed resources that could be put to work.
Concerning the Soros legend, as Gene G. Marcial unveils in his book `Secrets of the Street', G. Soros had a mole in the Bank of England. By the way, who was the second party in the monstrous anti-pound speculation and who lost the billions? The National Bank of Malaysia?
This eminent crash course for economists is a must read for all those who want to understand the world we live in.
5.0 out of 5 stars It was lovely,
This review is from: The Return of Depression Economics (Paperback)I love the quality of the book as I was not expecting such good quality book. The price was reasonable and the delivery service was awesome :)
5.0 out of 5 stars The Dismal Science,
This review is from: The Return of Depression Economics (Paperback)According to the nineteenth century essayist Thomas Carlyle economics was 'the dismal science'. It's quite clear from this erudite and witty book by Paul Krugman that economics when presented in a clear and concise manner can actually make sense. Unfortunately, it's also clear that if you put two economists together the result will be a minimum of three opinions. Krugman describes his work as 'not so much about what happened as why it happened, how the victims can recover and how we can prevent it from happening again.' Frankly, he cannot prevent it happening again because of the weight of the political variables that created the current crisis. However, one of the refreshing things about Krugman's book is that in making his case he admits he has no idea what caused some of the recent international crises although, in general terms at least, he remains an unreconstructed Keynesian when providing the answer.
The conversion of China to market economics in the 1980's and the collapse of the Soviet regime in the same decade removed realistic challenges to free markets. The collapse of the USSR also led to the collapse of regimes and revolutionary groups which the Soviet regime had financed. Krugman opines 'we live in a world in which property rights and free markets are viewed as fundamental principles, not grudging expedients: where the unpleasant aspects of a market system - inequality, unemployment, injustice - are accepted as facts of life'. In sum, there is no plausible alternative. Those who disagreed tended to misinterpret future economic trends seeking to increase the price of raw materials rather than bring the Third World countries into the modern industrial world. However, technological advances made it profitable for industrialised countries to source their manufactured products from the Third World, particularly South East Asia. Socialism promised development, capitalism delivered it.
Krugman claims several warnings of the return of depression economics were ignored during the 1980s and 1990s. Latin America was 'almost uniquely subject to currency crises, banking failures, bouts of hyperinflation and all the other monetary ills known to modern man'. These were caused by weak elected administrations alternating with strong military governments, both of which tried to buy populist support with programmes they could not afford financed by insecure loans leading to balance of payments crises and hyperinflation. The Pinochet regime's policy of sound money and free markets provided a clear economic lead which continued after Chile returned to democracy in 1989. Other Latin American nations adopted privatisation, raised import restrictions and introduced investment policies which encouraged the inflow of foreign capital. However, this inflow did not lead to significant economic growth. In September 1994 economists hailed the 'Mexican miracle', three months later Mexico plunged into financial meltdown known as the 'tequila crisis'. Social unrest, political assassination and a spending spree destroyed investor confidence which spread across Latin America. Economic assistance from the United States and the World Bank provided a solution but Krugman contends it was ineffective when considering the Asian and global crises which followed.
Between 1953 and 1973 Japan changed from a largely agricultural nation into the world's largest exporter of steel and automobiles. By the beginning of 1990 Japan's market capitalisation was larger than that of the United States which had twice Japan's population and gross domestic product. The rise in stock market values was not justified by Japan's underlying economic data. It was irrational, manic, speculative, financed by borrowed money and underpinned by the delusion that all bank deposits were secured by the government. When the financial bubble burst it created a liquidity trap because people were reluctant to spend and investment into the economic system did not produce growth. Krugman argued in true Keynesian fashion that anticipated inflation is one method that could have been used to get Japan out of recession. Unfortunately, this is of little value to hoarders lacking the ability to increase their income.
Krugman identifies the 'vicious circle of financial crisis' which starts with financial problems for companies, banks and households, leading to falling currency, rising interest rates and a slump in the economy which produces a loss of confidence and a decline in investment. In economics panics tend to be self-validating and often based on rumour. However, there are times when panic is not justified by the actual news such as the attempted assassination of Ronald Reagan which produced a short term panic in which those who panicked lost money because the dollar remained sound and the economy itself was strong. The Left regularly fulminates against speculators from the 'Gnomes of Zurich' to 'the Masters of the Universe' but they are a fact of economic life and their absence was one of the reasons why the Soviet Union failed. George Soros is the best known speculator who not only sees a potential currency crisis but does his best to provoke one including the British 'Black Wednesday' in September 1992. However, Soros was only able to speculate because the British government dithered as to whether it should raise interest rates or float its currency.
Krugman argues Keynes provided the answer to the vicissitudes of free market economies by cutting interest rates and increasing budget deficits to fight recessions. Such policy decisions were enforced by the International Monetary Fund (IMF) acting in its capacity as 'lender of last resort'. Krugman claims the IMF has been guilty of making bad decisions in the case of Asia by demanding, as a condition of loans, the raising of taxes, the cutting of spending and structural reform. Krugman argues the global slump required a rescue operation, involing extending government control. Given the absence of government control that permitted unsound lending in the United States and Great Britain one can understand this. However, the question is who can trust those who got us into this mess to get us out of it? I disagree with many of Krugman's assumptions but the book is a pleasure to read. Five stars.
4.0 out of 5 stars Good intro,
This review is from: The Return of Depression Economics (Paperback)There are several things that make this book a good read. Firstly, the writing style is concise, good humoured and boistered with useful examples and only occasional reference to theory and jargon. Secondly, the book is timely,illuminating and thought provoking. Anyone with an interest in economics or getting started in studying the subject will find much to enjoy or use in these pages. Krugman is obviously no light -weight so despite the breezy tone and tendency brush aside contending points of view or simplify complex economic events, the reader feels that they are safe in his hands.
The main argument of 'The Return...' is that the globalisation of financial markets (eg: greater movement of capital around the world ) and the growth of complex financial instruments to create and channel funding has meant there is an increasing tendency for events in one country or market sector (housing) affect Events in another.The result is that even healthy economies, companies banks will and can collapse as worried investors try to pull their funds. Krugman provides numerous examples from the Great Depression onwards of how a trickle of bad news,financial chicanery or over-uberence in the form of asset bubbles can lead to huge local and global impacts to 'real' people in the form of lost jobs, lower incomes and falling asset values.
Kaugman suggests that the real problem with the global financial sector is not that is greedy or has a tendency to be too clever, it is that it is big and complex, essentially unknowable for government to regulate or even understand what is going on. Financial markets it could be said,resemble casinos where bets are placed on currencies or asset classes rising or falling in value over time. Of course financial markets do great good - provide mortgage funding, assist government borrowing and led to business's and individuals for investment or consumption purposes. The issue is that in a casino, bad bets will affect single individuals and ultimately losses are knowable and can be restricted. In financial markets, if investors get 'spooked' or over excitied by a particular phenonoma ( dot .com boom and bust) there can a range of immediate but worryingly devastating secound round effects on particular countries or businesses regardless of the strength of their 'fundamentals'.
Krugman is great on the economic history, a tad light on analysis but clear enough. My only real concern is that it lacks any real bite in terms of solutions and is altogther too brief, given the importance of the topic.He suggests the now established approach of central banks of some form of quantative easing ( old style Keynsian demand management) and greater regulation of markets. The flaw with this approach is that governments and tax payers are asked to pay for the sins of the markets, sins that no doubt be wiling to commit again given the opportunity in the near future. Plus governments might get used to the idea of printing money as a away of getting around difficult problems, only to make matters worse by the attendant inflation and 'moral hazard'.
Perhaps governments should realise that while financial markets and their play makers are important they are not gods. Therefore regulation and maybe taxing financial transactions (especially in currency) should be taxed and the funds used as a reserve for the next crisis , when it happens. Maybe, we should also be mature enough to realise that financial markets and investors are only 'doing their job'. What governments need to do,as well as consumers is view borrowing not as an opportunity but as a serious way of losing 'sovereignty'. If you don't want become a victim avoid becoming over-borrowing. This means western societies will have to fundementally review the debt culture they become addicted to since post-war times. Also, governments should act more in concert. Markets are 'bigger' then nation states, so cooperation in the interest of global economies is needed, not selfish and short -sighted policies that benefit just the financial sector. If this sounds like idealist rambling, so be it. But it would be better if governments started looking issues to do with speculation, market fixing and other occult market structures and practises before it forced them upon by the next global crisis?
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The Return of Depression Economics by Paul Krugman (Paperback - 4 Dec 2008)