The Return of Depression Economics by Paul Krugman

The Return of Depression Economics examines how the crises in the worldwide economics eventually led to the financial crisis in the United States in 2008. Paul Krugman, the author of this book, likens the complicated financial and economic problems of other places in the world to a plague and deduces that USA would have caught the epidemic sooner or later, which has happened in 2008. He reasons that, after the collapse of the Soviet Union, free market economics did not take hold as well as expected. This was followed by the economic troubles in Asia and South America during the nineties.

In Latin America, Mexico's Tequila Crisis in 1994 led to the devaluation of the peso. When the GDP of that country dropped, the trouble spread to Argentina. In Asia, Japan presented a no-growth problem economy where investors have lost money during the latest bubble, due to their liquidity troubles and the deficient demand for goods on a global scale. Thus the Japanese economy was forced into recession. The economic problems and tensions the world faced and is still facing parallels what is happening today in the United States of America,

The book discusses, during its later chapters, why and how the US banking system collapsed. It began with the Glass-Steagal Act separating the conventional banks into commercial and investment banks with investment banks taking on more risks. Normally, banks are highly regulated and must be required to hold liquid reserves. Klugman believes the lack of regulation from the start more than the deregulation caused the banks to take unconventional risks. At this point, regulation might have helped, but the anti-regulation principles of the Bush Administration led to the false beliefs of financial innovation and brought on the banking crisis.

Klugman gives weight to the John Maynard Keynes' doctrine and feels that Keynesian economics is relevant for our time as well as the depression era of the thirties. In addition, he thinks that financial globalization "has turned out to be even more dangerous than we realized," and that we need to learn how to deal with it.

The Return of Depression Economics has an introduction and 10 chapters. It is written with a clear language that even a layman would easily understand. The book is in hardcover with 191 pages and ISBN-10: 0393320367 and ISBN-13: 978-0393320367.

The author Paul Robin Krugman is an economist, columnist, and author. In 2008, he won the Nobel Memorial Prize in Economics for his contributions to New Trade Theory and New Economic Geography and has also won other awards in the field of economics. He is the Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs, Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times. He has written more than 25 books, around 50 articles, and many columns in the NewYork Times.

A few of his other books are: Country Is Not a Company, The Conscience of a Liberal, The Great Unraveling: Losing Our Way in the New Century, The Age of Diminished Expectations: U.S. Economic Policy in the 1990s, Currency Crises, Development, Geography, and Economic Theory, Empirical Studies of Strategic Trade Policy, Exchange-Rate Instability, The General Theory of Employment, Interest And Money, and International Economics: Theory & Policy.

This book has enlightened me by making complex economic problems easy to understand, and as such, it deserves to be on the shelves of the public libraries and bookshelves of people who need to understand what has happened to our economy and what may happen in the future.

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