Dear Dr. Krugman,
Re: Depression Economics Returns
I cannot understand why what I believe to be a maxim of recession/depression economics has not yet been applied.
Private industry is scared to hire people. Indeed, it is laying people off. It is rightly scared about the current state of the economy.
When the economy diminishes, people buy less goods and subscribe to less services. This seems, to me, to be a fundamental tenet of economics.
How can this be cured?
The private sector will not hire anybody because the recession continues.
There are only two players in the employment market: the private sector and the public sector. Right now government is shedding jobs and that seems to me to be the opposite of the appropriate strategy.
An economy is kick-started when people buy goods. People only buy goods if they feel secure in their jobs. Government provides some of the best job security for people. As such, when government adds jobs, the economy is stimulated.
This goes completely against Ronald Reagan's economic philosophy. But it not only rings true; it is true. Government is the solution to economic crises in which confidence in the "free market" fails.
The truth is that most "so-called" capitalists these days would desecrate the grave of Adam Smith. They try to claim that "free markets" are "unregulated markets". If there is true competition then they are right. But there isn't true competition. And they are monopolists/oligopolists. They are a detriment to our economy. Good regulation would've caught them and shut them down. But we gutted that regulation. And we gutted the regulations that would've warned us about gutting those regulations. We sold out. And now the entire world suffers for our follies.
All we can do is to do what Pres. Theodore Roosevelt did. Break up the mega-banks. Break up the mega-corporations. Bust all of the trust-like entities in our country. TR would approve. And John McCain had better damned well approve as well, and get his more moderate colleagues to sign on. This crap has come to an end. We bury it today.
Michael B. McLaughlin, Esq., Attorney and Counselor-at-Law
New York State
USA