We Might Be Doomed, Debt Deal or Not

So Greece has a bailout deal, and the US is maybe closing in on its own agreement to avoid a default. Cause for celebration? More like depression, writes Paul Krugman. Or, as he puts it in the New York Times, a "Lesser Depression." Policy-makers might "manage to avoid immediate catastrophe," he writes, but "the deals being struck on both sides of the Atlantic are almost guaranteed to make the broader economic slump worse." The problem is their misguided focus on "deficit panic" rather than unemployment.

Governments here and abroad are slashing spending at precisely the wrong time, and we'll all pay for it eventually, writes Krugman. These "policy elites" are "ignoring all the lessons of history," he warns, and there's almost no winning. "If either of the current debt negotiations fails, we could be about to replay" the global banking collapse of 1931. And if they succeed? "We will be set to replay the great mistake of 1937: the premature turn to fiscal contraction that derailed economic recovery" and kept the Depression in place until WWII. "And the Lesser Depression goes on." Click to read the full column. (More recession stories.)