| ithis said: Quicq questions: How come the economy is in this bad shape although everyone was spending like crazy for like a gazilion years before the crisys, and nobody saved nothing? How will trying to spend more now that there is less will help when spending all of it when there was lots lead to now? |
What is not being understood apparently is that the economy has run on a big bubble of debt, and there isn't any other place for people to get money from, in order to keep the economy going. People maxed out credit cards, borrowed against their home equity, and went from one household income to two. Along the way, India and China came online, along with Russia and Eastern Europe, and put downward pressure on wages. All these things mean there isn't a place to get money to grow the economy, and that includes government running up debt. A lot of nations have been engaged in deficit spending that the likes of Krugman say are "sustainable" if under X% of GNP. Well, what happens when the GNP shrinks? Oh oh... you can't sustain it. Of course, the Krugmans in the world don't have to suffer like average Joes.
