Many fear that the US is poised on the cusp of a second depression. Simon Johnson, on of the most astute observers of the current crisis, takes exception to this view by making an interesting comparison of the current economic slump to the busts of the 19th Century, particularly the long decline between 1873 and 1879.
With the fiscal option being taken off the table by Obama’s capitulation on the debt limit extortion, Johnson concludes ironically that the looming right wing populist attack on the monetary option (a weak anti-deflationary tool to be sure) would be like nailing the working class to a “cross of gold” in a time of recession. In so doing, one of the most cogent critics of the Federal Reserve (for protecting the “too big to fail banks”) ends up defending its Chairman. What a strange world we live in, where modern populists adopt the values of the banker who impoverishes them.
Simon Johnson, Baseline Scenario, 18 August 2011