Daily VideoOctober 13, 2008
Economy Experts Discuss Global Crisis
As the financial crisis that started in the U.S. housing market extends into a global credit crisis, experts on economics discussed the worsening situation with the NewsHour’s Jeffrey Brown.
Among the guests is New York Times columnist and Princeton economics professor Paul Krugman, who on Oct. 13 won the prestigious Nobel Prize for his work in economics.
The guests talk about how the current situation is similar to 1931, when an economic crisis led to over a decade of terrible economic conditions in America and around the world.
Krugman argues that world powers need a coordinated plan to fix frozen credit markets or there could be terrible consequences.
As of Monday morning, the U.S. stock market was rebounding, along with other worldwide markets, after several central banks in Europe promised to inject new money into the worldwide financial system and buy stakes in banks.
“It’s clear to everybody now that we need a coordinated rescue. We need capital pushed into the system. We need some sort of guarantees to keep money flowing. If they don’t do it this weekend, it’s a very, very bad scene.” – Paul Krugman, Princeton University and the New York Times
“It is like 1931 in the credit crunch aspect for sure, but a credit crunch does not have to become a Great Depression. What makes a credit crunch into a Great Depression is policy errors, such as raising taxes — we’re about to do that — protectionism — we’re cavalier about that — arbitrary vilification over years, through revenge through the courts and through Congress and hearings against the bad guys, instead of focusing on reform.” – Amity Shlaes, Bloomberg
“I think there was already a lot of pressure, even before this financial crisis got serious, to the effect that already government was going to be growing its role in the world economy, partly because the center of gravity was shifting towards economies like China, which has a big role for the government.” – Sebastian Mallaby, Council on Foreign Relations
Warm Up Questions
1. What has been happening in the U.S. stock market over the past month?
2. What was the Great Depression?
3. What is the Nobel Prize?
1. Why do you think the problems with America’s economy have spread to other countries? Can you think of some basic ways that the economies of foreign countries are connected to ours? 2. Learn some basic facts about the Great Depression. Are you worried that America’s economy could collapse again? Should the government be working to keep that from happening?
3. Why do you think Britain came up with a better solution faster than the United States?
4. Does it make you respect Paul Krugman’s opinion more because you know he won the Nobel Prize? Are prizes important? Why or why not?
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