Paul Krugman:

We are now, I fear, in the early stages of a third depression…

And this third depression will be primarily a failure of policy. Around the world … governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending…

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around … Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. …

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

But Prof. Krugman, those aren’t the people who MATTER.

Bob Somerby:

Krugman must be read: In this morning’s column, Paul Krugman makes a gloomy semi-prediction about where we may be heading… [See above.].) He describes the global “failure of policy” which is leading us there.

“Why the wrong turn in policy?” he asks. At least in the American sphere, we’ll suggest two major answers:

The Infection of Dumb
The Triumph of Power

And I would say, the Abdication of Power. As long as we the people let the foxes run the henhouse, they’ll keep on eating us for lunch.