Depression Economics
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Depression Economics
The Return of Depression Economics is a renowned book that analyzes various aspects that affect the economy from a national and global perspective. While focusing on recession as one of the elements that have shaped the current financial system in different regions of the world, Krugman highlights the possibility of a depression even when the economy of a nation appears stable. In such a situation, the influential parties use techniques aimed at benefiting all stakeholders yet they fail to consider certain crucial factors. In order to support his argument, the author of this informative book offers the example of the Great Capitol Hill Baby-Sitting Co-Op in Washington DC. In this organization, a couple would get a coupon for every baby-sitting session in which they engaged. Accordingly, most couples were afraid of missing crucial social events. This resulted in a decline in the number of parents seeking the baby-sitting services of the group while increase the number of couples willing to take care of their neighbors’ babies. Consequently, the group experienced a financial depression (Krugman 2000, 21).
As Krugman
indicates, adjusting the value of the vouchers would be a useful tactic for the
group in its recovery process. This is similar to the technique used by the
central bank in order to stimulate the financial system of a region. However,
critics of his analysis regarding national and global economics assert that
this analyst focuses on specific aspects while ignoring certain vital factors.
For instance, some argue that manipulating the currency of a country may only
be effective in dealing with a financial recession on a short-term basis. Some
also indicate depression may be due to external factors that are beyond the
control of the administrative agencies in a country.
Bibliography
Krugman, Paul R. The Return of Depression Economics. London: Penguin, 2000.