The Crisis of Capitalist Democracy the name of my new book on the economic crisis, just published by Harvard University Press. Of course the book covers some of the same ground as my previous book on the crisis, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression (Harvard University Press 2009), but it is longer, more detailed, more scholarly, but above all more focused in the events of 2009 rather than of 2008. The first book was completed (beyond possibility of substantive change) on February 2, 2009, less than two weeks after Obama's inauguration. The second book was completed on January 4 of this year. Much of note happened in 2009 with reference to the crisis, including not only the enactment and initial implementation of the $787 billion stimulus (which turned out to be an $862 billion stimulus) (including "cash for clunkers"), the stress tests of the banks, the mortgage-relief programs, the public outrage over bankers' bonuses, the GM and Chrysler bankruptcies, and the Treasury's proposals for financial regulatory reform, but also the growth in concern over soaring federal budget deficits, which in turn have implications for the position of the United States in the global economy, as well as for the continued prosperity of the nation. I share the concern with our fiscal improvidence; we seem unable to close the gap between public expenditures and tax revenues--or even to keep it from growing ever wider.

These are matters of emphasis in the new book, along with a deeper exploration of the causes of the economic crisis and the mistakes of economists, which I describe compendiously as "forgetfulness of Keynes."

The second book was completed, as I said, on January 4 of this year, more than two and a half months ago. And the world has not stood still. I have blogged about the new crisis-related issues that have surfaced since then, both in this blog and my blog with the great economist Gary Becker (now at a new Web address, Today Becker and I blogged about the Greek crisis; our previous blogs since January 4 have included pieces on the President's quixotic promise to double U.S. exports within the next five years, the President's job-subsidy plan (another sure loser), the problem of long-run unemployment (some 40 percent of the current unemployed have been unemployed for more than half a year), the pluses and minuses of the stimulus plan, and consumer financial protection.

I want to make a small addition to my piece on the Greek crisis, and a correction to my piece on the Presidente's job-subsidy plan.

What makes the Greek crisis particularly acute is that Greece does not have its own currency, and hence it cannot inflate or devalue its way out of its crushing indebtedness resulting from its fiscal improvidence (which resembles our own!). Devaluation would help, as I mentioned, because it would make Greek exports cheaper and imports more expensive, and this would either reduce its trade deficit or create (or increase) a trade surplus, and either way would reduce the gap between income and expenditures. But in addition, to the extent that Greece has euro reserves, it could by devaluing (if it had its currency, the drachma--its currency before it became a member of the European Monetary Union) use its reserves to repay its drachma-denominated debt cheaply, since by devaluation the euro would buy more drachmas.

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Richard A. Posner

Richard Posner is an author and federal appeals court judge. He has written more than 2500 published judicial opinions and continues to teach at the University of Chicago Law School. More

Richard A. Posner worked for several years in Washington during the Kennedy and Johnson Administrations. He worked for Justice William J. Brennan, Jr, the Solicitor General of the U.S., Thurgood Marshall, and as general counsel of President Johnson's Task Force on Communications Policy. Posner entered law teaching in 1968 at Stanford and became professor of law at the University of Chicago Law School in 1969. He was appointed Judge of the U.S. Court of Appeals for the Seventh Circuit in 1981 and served as Chief Judge from 1993 to 2000. He has written more than 2500 published judicial opinions and continues to teach at the University of Chicago Law School. His academic work has covered a broad range, with particular emphasis on the application of economics to law. His most recent books are How Judges Think (2008), Law and Literature (3d ed. 2009), A Failure of Capitalism: The Crisis of '08 and the Descent into Depression (2009). He has received the Thomas C. Schelling Award for scholarly contributions that have had an impact on public policy from the John F. Kennedy School of Government at Harvard University, and the Henry J. Friendly Medal from the American Law Institute.

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