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The Return of Depression Economics- by Paul Krugman

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I have read a large part of this book by Paul Krugman titled "The Return of Depression Economics" where he explains what were the recent recessions and falls in the stock markets about and also what happened in the lead up to this one.

He points the finger squarely at Alan Greenspan for allowing the housing bubble to get inflated to such a large one without looking further into the reasons for the huge increases and still maintain relatively low interest rates. He argues that Greenspan's blind faith in the triumph of the free market blindsided him to the flaws in the housing market and the huge positions that the financial markets were making using derivatives.

At the same time, looking at the Japanese long period of deflation and recession and also the Asian financial crisis in the late 1990s, he gives readers an insight to what happened then and how the different maverick economies of Malaysia and Hong Kong responded to that crisis. This is the crux of the message that he is trying to get across, that this economic recession or depression upon us needs well thought out policies and not the high interest, high taxes policies in aftermath of the 1929 crash that led to the Great Depression of the 1930s.

Simple and easy to read, it reads like a thriller unfolding a puzzle and shows you the basic mechanics of why economies fail and what were the different historical responses. A must read.

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