Thomas Palley

Thomas Palley - A Second Great Depression is Possible

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Thomas Palley has a new op-ed in the Financial Times. Palley overviews some facts which give credibility to those economists predicting a double dip recession. If recession goes on long enough, it can be classified as a depression. A recession can be classified as a depression if it lasts more than 3 years.

There is a simple logic to why the economy will experience a second dip. That logic rests on the economics of deleveraging which inevitably produces a two-step correction. The first step has been worked through, and it triggered a financial crisis that caused the worst recession since the Great Depression. The second step has only just begun.

Latest from Thomas Palley is a must read

A big tip o' the hat to disrael on DailyKos, who caught the latest from economist Thomas Palley, America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession.

Palley's introduction sets the hook quite well:

Most commentary has therefore focused on market failure in the housing and credit markets. But what if the house price bubble developed because the economy needed a bubble to ensure continued growth? In that case the real cause of the crisis would be the economy’s underlying macroeconomic structure. A focus on the housing and credit markets would miss that.