In watching news about the G-20 proceedings you get the sensation that European governments are unable to get over the shock of recent events in Greece and therefore are more focused on addressing long-term deficits rather than the current challenge of protecting a fledgling global economic recovery. Paul Krugman discusses this in his most recent blog post ominously entitled “The Third Depression”:
“We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.”
