“There are three things that macroeconomic managers want for their economies. They want discretion in monetary policy, so that they can fight recessions and curb inflation. They want stable exchange rates, so that businesses are not faced with too much uncertainty. And they want to leave international business free - in particular, to allow people to exchange money however they like - in order to get out of the private sector’s way.”The Return Of Depression Economics, by Paul Krugman, pg. 106

Five Key Takeaways

• The ‘New World Order’ serves as the background for this 1999 book, as the United States, as world hegemone, sought to help improve the economies of the world. One way the US sought to facilitate higher global economic standards was through tarrif reductions and the encouragement of free markets.
• The Great Depression could have been prevented if the government had printed more money to stabilize the banking system, but ties to the gold standard hindered this action. The Federal Reserve was created as a result to monitor the flow of money for this purpose.
• The government and Federal Reserve can use tools such as printing money, adjusting interest rates, and manipulating currency exchange rates to prevent or alleviate a depression or recession. Reducing taxes is another tool at the government’s disposal for helping to improve economic situations.
• A “Potemkin Facade” is a fake economic representation named after Grigori Potemkin, the chief minister of Catherine of Russia, who presented fake representations of thriving villages in Russia to make them appear more prosperous than they actually were.
• The concept of a ‘liquidity trap’ can prevent economic recovery even when production and work are thriving, as seen in Japan’s prolonged recession during the 1990’s.

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