Last night, I did a presentation on part of a case I did in my macroeconomics class about the current economic crisis. My team’s part was comparing the Great Depression and Japan’s “Lost Decade” with the current situation. A rather big topic.
Japan’s crisis is remarkably similar on a number of fronts to our current situation. One notable aspect, touched slightly upon by Krugman in the linked post, is that of sluggish response. In particular, it took the whole decade before someone said “let’s just admit the banks are in trouble and do a massive recapitalization. That was a big move.
Krugman is concerned that our situation might end up a lot worse than a decade that many economists consider “lost.” That’s a bad thing to be thinking. Someone in class last night asked me whether I thought, considering all of the new things the Fed is doing (credit easing, etc) under Bernanke and the stimulus package and possible additional efforts, we were going to get out of this.
Honestly? If we don’t address the bank issue, I am not sure we’ll see the trough of this recession this year. Yes, this entire year. At best, I’m thinking mid-year before we see something. That’s a while from now…