Krugman explains the gradual march to economic crisis
Thursday on PBS Newshour, Nobel prize-winning economist Paul Krugman explained the relevance of Hyman Minsky’s theory on the current economic crisis.
“One of his arguments was exactly that you have, you have a depression, you have a bad scene and everybody gets cautious and that caution gives you several decades of stability and as the stability goes on people forget the dangers and they make the same mistakes and get you right back into another one,” he said. “So there was a natural cycle.”
Krugman added that in addition to this natural cycle, conservatives had pushed a “religiously pro-market” ideology that claimed all regulation was harmful and the government was always the problem.
“So that we had a kind of reckless removal of the safeguards on the system all on top of what would probably have been a gradual march to crisis anyway,” he continued. “And paraphrase Lincoln – and the crisis came. The specific probably don’t matter very much, it ended up being subprime and then Lehman Brothers, but it could have been something else. One of, one of these years we were going to have this crisis.”
Watch video, courtesy of PBS, below: