I interrupted my blogging at this site on October 23. There were two reasons, closely related. The first is that I needed the time to finish my new book on the economic situation. It is entitled "The Crisis of Capitalist Democracy" and will be published by the Harvard University Press in March. The second is that there would be too much overlap between blog and book.
Now that the book is completed, I can resume blogging, and will post my first new entry tomorrow.
Let me say something about my new book. It is twice as long as "A Failure of Capitalism: The Crisis of '08 and the Descent into Depression," which was completed at the beginning of last February and published in April. The new book both goes in greater depth into issues discussed in the last book and covers much new ground. More is understood now about the causes and the course of the financial crisis that crested in September 2008 and precipitated a sharp general decline of the economy as a whole both here and abroad. The issue of causality is central to the reappointment of Bernanke as chairman of the Federal Reserve, to the rising wave of banker bashing, to the just-begun investigation by the Financial Crisis Inquiry Commission, and to pending and proposed legislation (most recently the proposal to impose a "Financial Crisis Responsibility Fee" on the largest banks). I am in sharp disagreement with the populist theory, embraced by the Administration, that the principal blame for the financial crisis should be assigned to "fat cat bankers." Bigger culprits, in my opinion, are unsound monetary policy and lax banking regulation, with an assist from the economics profession.
In addition to exploring the causes of the crisis in greater depth than in my earlier book, the new book brings the story of the crisis up to date by examining in detail the relevant developments, both economic and political (and they can't be separated) since the inauguration of President Obama. This is a story of ambitious recovery measures, of mixed success, and of ambitious governmental proposals of dubious merit for preventing a recurrence of the conditions that resulted in the financial collapse. I emphasize in the book that although the economy is beginning to recover from the depths of the current depression (as I insist our economic situation should be called), the immense costs that have been incurred to fight the depression, the lost tax revenues, and the Administration's ambitious long-term social programs, all taken together, have deepened the concerns that I expressed in the earlier book about the nation's economic future.
I had thought when I agreed with my publisher on a deadline for the new book that by the end of 2009 the shape of recovery would be clear. It is not. We simply cannot respomsibly gauge the pace of the recovery. Nor is it even clear whether we are better off with a fast recovery or a slow one. A fast recovery could create an acute risk of dangerously high inflation. A slow recovery could greatly increase the size of the federal deficit, threatening all sorts of economic and political harms, with eventual unacceptable inflation only one of them. I am particularly concerned with the danger of social and political turmoil if high unemployment and related economic pathologies persist.
We are now in the third year of a depression. The economic crisis continues to occupy center stage despite all the other news assailing us. Tomorrow I will blog about developments so recent that I could not include them in the new book.