Krugman: This Looks Like a Permanent Depression

Evidence suggests economy may never fully recover

By Evann Gastaldo,  Newser Staff

Posted Nov 18, 2013 12:19 PM CST | Updated Nov 18, 2013 1:40 PM CST

(Newser) – When it comes to the economy, you hear a lot of talk about "exit strategies," with monetary officials resigned to the fact that, for now, "credit must be easy and interest rates low"—just until the US gets back on its feet. "But what if the world we’ve been living in for the past five years is the new normal?" writes Paul Krugman in the New York Times. Increasingly, economists are starting to think we may be in a persistent slump; Larry Summers himself recently made the case at a major IMF conference.

There's mounds of evidence that Summers is right, including the fact that though the financial crisis that launched us into the "Great Recession" is long over, the economy is still in the dumps. And that even during the huge housing and debt bubble, with spending up, the economy wasn't doing all that great. This could be thanks to slowing population growth. "The evidence suggests that we have become an economy whose normal state is one of mild depression," Krugman writes. It seems likely that "depression rules will apply for a very long time." Click for his full column.

In this Thursday, April 11, 2013 photo, people wait in line before the Dr. King Career Fair at the Empire State Plaza Convention Center in Albany, NY.
In this Thursday, April 11, 2013 photo, people wait in line before the Dr. King Career Fair at the Empire State Plaza Convention Center in Albany, NY.   (AP Photo/Mike Groll)
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