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Wirtschaftswissenschaftliche Fakultt The Financial Crisis and the Regulation of Financial Institutions

How Debt Can End A Debt-Originated Depression: A Paul Krugmans View on the Minskys Instability Hypothesis, the Danger of Austerity and the Euro Penalty.

Name: Pinto Maciel Surname: Denis Augusto Student Nr.: 505471 Professor: Gary Cohen

1. Objective
In this paper, I firstly explain how high levels of debt in the private sector can lead to an economic slump according to Minskys Instability Hypothesis. Then, based on Paul Krugmans lessons, I briefly discuss why should the government step in and increase its spending in order to stimulate the economy. After that, I argue that the idea of Austerity is a dangerous one, because it hinders the actions that would minimize the recession damages. And finally I try to demonstrate how a single currency makes recovery harder for some European countries by limiting government action.

2. Introduction
The origin of business cycles is one of the one of the most important questions in macroeconomic theory. The emergence of a boom followed by a bust in an economy has been recognized by almost all economists as a constant in a capitalist system. Identifying, however, the causes that unleash the bust is a great source of disagreement between the schools of economic thought. After the burst of the 2007 housing bubble, the world experienced the deepest economic crisis since the Great Depression. The so-called Great Recession was responsible not only for a great slow down of the global economic activity, but also for the resurgence of a great debate on the economic theory. Well-known economists were puzzled with the recession. Not long before August 2007 many economists had been saying that the economic system has never been so safe and sound as it were. Among these there was the former president of the Federal Reserve Bank, Alan Greenspan, considered by many as one of the best FED Presidents ever. All of this confidence was mainly due to the FEDs rapid and successful response to previous crises such as the dot-com bubble in the end of the 90s. Moreover, the new financial instruments, whose development was made possible only by the series of deregulation acts (supported by Greenspan), played an important role in the development of such confidence. These instruments were supposed to guarantee the soundness and stability of the whole financial system, by permitting risks to be transferred to those actors who were more able and willing to bare them. As pointed out by Paul Krugman in his New York Times article How Did Economists Get It So Wrong? 1, many outstanding economists were pretty much sure about the stable situation of the economic theory before the shock caused by the crisis.

Krugman, Paul R. How Did Economists Get It So Wrong? . The New York Times, Sep. 2, 2009. Oct. 10, 2013.

Olivier Blanchard of M.I.T., now the chief economist at the Inte rnational Monetary Fund, declared that the state of macro is good. The battles of yesteryear, he said, were over, and there had been a broad convergence of vision. And in the real world, economists believed they had things under control: the central problem of depression-prevention has been solved, declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

In sum, everything seemed to be perfect, but it wasnt.

3. Minskys Instability Hypothesis

In the end of 2007 the American economy started to melt down, and, along with it, the ideas of a Washington University professor, whose way of thinking wasnt very popular during his lifetime, resurged. Hyman Minsky tried to explain economic downturns relating it to the indebtedness level of the economy as a whole. The Minskys Financial Instability Hypothesis links high leverage rates to the instability of the financial system, which ultimately can lead to an economic slump. The theory goes as follows. Debt along with its related concept (credit) was an important human invention because it permitted the flow of capital between the economic actors and the resulting better allocation of resources over time. However, being highly leveraged having a big amount of debt relative to your own assets leads to a state of vulnerability. During the good times having big levels of debt is actually no big deal. The problems coming along with indebtedness appears exactly when one faces an economic hardship. The pros and cons of incurring in debt is well explained by Anat Admati and Matin Hellwig in their book The Bankers New Clothes: Borrowing creates leverage: by borrowing, individuals and businesses can make investments that are larger than they can afford on their own right away. This leverage creates opportunities for the borrower, but it also magnifies the borrower's risk. The borrower makes promises to pay lenders specific amounts at given times in the future and gets to keep everything that is left after these promised debt payments. On the upside, if the investments turn out well, the leverage magnifies the borrower's profit. On the downside, however, if the investments do not return enough, the leverage magnifies the losses. The more one borrows, the greater this danger. 2 Until this point, weve limited ourselves to a microanalysis firms and individuals singularly considered, but not the economy as whole. Lets try now to jump to the macro level of analysis and try to understand the consequences of indebtedness. It should be pretty clear that a family who has financed 90% of his house is much more vulnerable to an interest rate fluctuation than other which has made a 50% down payment. What may
Admati, Anat; Hellwig, Martin F. The Bankers' New Clothes: What's Wrong with Banking and what to Do about it. (Princeton University Press: Princeton, 2013), pg. 17.

be not so obvious, however, is that a whole indebted economy turns out to be more vulnerable to financial crises. As Paul Krugman explains, high levels of debt leave the economy vulnerable to a sort of death spiral in which the very efforts of debtors to deleverage, to reduce their debt, create an environment that makes their debt problems even worse.3 Suppose the following situation: in an economy where households and businesses are relatively highly indebted, an economic downturn will lead the debtors to minimize the amount of money they owe. They can either sell their assets or cut spending, using the extra money to pay their debts. The problem emerges, however, due to the fact that, as the economy as whole goes under water, too many people will take these actions at the same time. If a great number of persons goes to the market to sell their assets lets say houses the major effect of this common action is a substantively drop in the home prices. As Paul Krugman says, the efforts of the homeowners are self-defeating. While theyre trying to get rid of their assets, a deflationary process takes place. The greater offer has an inevitable consequence of plunging the prices. Thats why, even as the nominal debt is being reduced, the real burden of it increases along with the purchasing power of a dollar. To explain this self-reinforcing process Irving Fisher coined the expression, which, though imprecise, expresses the essential truth: The more the debtors pay, the more they owe. A further consequence of this scenario is the situation Paul Krugman described as that in which debtors cant spend, and creditors wont spend. According to the same author, this state of affairs can be seen not only in the private sector (the households of highly indebted counties in the U.S. cut spending drastically, while those of low-debt counties just kept spending as much as they did before), but also in the public sector (within the European Union the more troubled countries are forced to go into very strict austerity programs and countries that have a relatively sound economy are trying to reduce spending as well). The obvious result of all that is a decline in aggregate demand, which, by its turn, leads to lower output and higher unemployment. Nevertheless, one may still be puzzled with this problem and may question himself: how did the economy get to such an indebted level? How could the lenders not notice how risky the loans made were? And how could the debtors get in such a trouble taking risks they couldnt bear?

Krugman, Paul R. End This Depression Now!. (W.W. Norton: New York, 2012), pg. 44.

An economy with low debt levels is usually not subject to major economic shocks. According the argument made on the previous paragraphs, these shocks wouldnt have a great impact because no great amount of debt should be paid, there run to markets wouldnt occur and, in consequence, the already mentioned debt spiral wouldnt take place. The problem is, Hyman Minsky argued, that the overall perception about the real risk of lending and borrowing may decline over time and the memory about the bad moments, which may have occurred in the past, just vanish away. That happens exactly because a low-debt economy and the resulting stable financial system give the economic actors the feeling of safety and confidence. When the economy is doing well, leveraging might almost always be a good deal, even for those who cant put any money down at the time of borrowing. Back to example of the housing market, if someone buys a house with no down payment, he will have even a substantial equity stake as the price rises and time goes by. The equity results specifically from the difference between the house actual price and the remaining debt. The lenders, on their turn, take lower risk. If the borrower cant keep paying the mortgage, the solution is to sell the house and pay the remaining debt. Given the rising prices, defaults are, therefore, really seldom because the mortgages face value will always be lower than the actual home price. The general feeling of safety and the lowering of the lending standards set the stage for what the economist Paul McCulley called the Minsky Moment. Paul Krugman describes very well this moment and its consequences:
Once debt levels are high enough, anything can trigger the Minsky momenta run-of-themill recession, the popping of a housing bubble, and so on. The immediate cause hardly matters; the important thing is that lenders rediscover the risks of debt, debtors are forced to start deleveraging, and Fishers debt-deflation spiral begins.4

Looking at the data, the Minskys Instability Hypothesis seems really plausible. Not only did high levels of indebtedness precede the Great Depression and the Great Recession, but also one can see an uprising of the debt-to-GDP ratio5. The second symptom the high slope of the graphic line even after 1929 - is not related to a debt growth, but otherwise to a rapid sinking of the GDP. That phenomenon cannot be seen after 2007, mostly because the governments response on past few years was more energetic in comparison to the past inertia, which didnt let the GDP sink as it did before.

Krugman, Paul R. op. cit., pg. 48

A measure of a country's federal debt in relation to its gross domestic product (GDP). By comparing what a country owes to what it produces, the debt-to-GDP ratio indicates the country's ability to pay back its debt.

The Fall and Rise of Household Debt6

What weve seen until now is that a highly indebted economy faces the constant danger of a meltdown, for leverage is closely related to the instability of the financial system. But its time to ask: which is the way out of the crisis? If debt leads to economic instability, the solution for a debt crisis must be cut spending and save money; the roots of the instability should be destroyed, one could argue. The answer, however, is not that obvious. In fact, what helps the economy make her way out of the debt-originated slump is not to reduce spending and to diminish the debts level. What a depressed economy really needs is more debt. But, this time, not private debt. Instead, the remedy the Depression Economics prescribes to such a situation is the increase in public spending. Why and how this should be done is what will be explained on the following pages.

4. Depression Economics
High unemployment and negative growth rate. These are the major problems of an economic recession. But why does all that happen to an economy that seemed to be perfectly healthy months before the meltdown begun? In fact, resources and knowledge are still there to be used. No natural disaster hindered the economy, nor is there a shortage of any raw material. The real cause of high unemployment and the low economic output is the insufficient aggregate demand. Due to the loss of confidence originated by the crash of the financial system, consumers are unwilling to spend. As demand decreases, businesses must slow down production firing workers. In turn, with

I took the graphic from Paul Krugmans book End This Depression Now!. Source: Historical Statistics of the United States and Federal Reserve Board. Notice that the data is not all compatible over time (one set of data runs from 1916 to 1976 and the other from 1950 up to the present). For the argument made here, however, this divergence is not important.

Debt as % of GDP

the rise of unemployment, confidence of the households in the future deepens further leading to an even smaller demand. That is exactly what Keynes has called the paradox of thrift. This paradox states that what seems good for a household individually may do great harm to the economy as a whole. In more specific terms: if everyone tries to save more at the same time in a depressed economy, this increased desire to save will not lead to higher investment, which would enhance wealth in the future. Instead, the result of this widespread effort of saving money is that income declines and the economy shrinks. After all, your spending is my income, and my spending is your income7. In attempting to save more individually, households and businesses end up shrinking present and future output in aggregate. If households and businesses are not able to get out this self-reinforcing downward spiral, who should assume the task of breaking the circularity of this demand-shrinking vicious cycle? The answer is: government. It is the most suited economic actor to do this job. Government can fight a recession basically in two ways: inflating the monetary system or increasing public spending. Lets explain briefly these two mechanisms. First: inflating the monetary system (which is pretty much the same of increasing the money supply or, in even simpler terms, printing money) results ultimately in a lower interest rate. On one hand, it reduces the cost of borrowing and turns consumption cheaper; on the other hand, theres a rise in inflation which in turn devalues the money over time and turns saving less interesting. Thus, in acting on the monetary system, the government induces the households and businesses to increase spending. That means the government will increase only indirectly the aggregate demand. The government, however, still can act directly to soften and solve the problem of insufficient demand. Carrying out public enterprise, such as bridges and roads, is another possibility to reduce unemployment and increase demand. In this case, the government will itself buy the required goods and raw materials and hire the workforce that would otherwise be unemployed. The money injected in the economy will be spent either by the newly employed workforce or by the government suppliers, stimulating the whole economy. According to Keynes lessons, the main point is the money circulation in the economy. The government must assure that, even if not in an usual way:

Krugman, Paul R. op. cit., pg. 28

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing. 8

Every economic decision carries with it a trade-off, however. Its for no other reason that economics is often called the dismal science. In the case were dealing with, its not different. Although its pretty much clear that the increase in public spending prevents aggregate demand from falling sharply, it comes with a cost. The money used by the government to finance public spending can be raised either through taxation or borrowing. As taxation charges the economy with a heavy deadweight loss, raising money in the financial markets is mostly the chosen option. Yet, the borrowed money must be paid in the future and here we come to the problem of debt, which will be dealt with in the next pages.

5. Public Debt
It may sound quite paradoxical to say that the way out of a debt-originated crisis is to create more debt. Still, this is the right answer. To defend this point of view let us start to tackle its critiques, which may provide us with an overview of the pros and cons this idea implicates. Analyzing and refuting the criticism against expansionary policy is actually the best way to defend a Keynesian response to the crisis. Its pretty much clear that government is able to stimulate the economy. Moreover, whether an increase in government spending lowers the unemployment rates is not object of questions. The epicenter of economic debate is whether the side effects of an expansionary and interventionist policy would outweigh the benefits of reducing unemployment and increasing growth. Put in simple terms: at which costs can we stimulate our economy? 5.1. Fiscal Policy Against Monetary Policy? The first point that should be tackled is the statement about the supposedly irrational opposition between fiscal and monetary policy. In a depressed economy the central bank must lower the interest in order to stimulate consumption thats the monetary policy. On the other hand, Keynesianism prescribes a government intervention by borrowing in the market to finance public spending. Yet, as the government goes to the capital market and borrows, the demand for money will increase, which ultimately

John Maynard. The General Theory of Employment, Interest and Money . (The MacMillan Press LTD: London, 1973), pg. 129

would lead to a higher interest rate. If things were like that, the obvious conclusion is that government is acting in a paradoxical way. While central bank tries to lower interest rates, government borrows in financial markets increasing money demand and, thus, the interest rates. Even though this statement seems really plausible at first sight, it doesnt hold true in a depressed economy. When we find ourselves in an economic slump, there are more savings available then investors willing to use that money. Even with an interest rate near zero, there will still be extra savings waiting for an opportunity to be invested. Theres an excess of money supply and the government borrowing would absorb that. As Paul Krugman clearly explains: In effect, we have an incipient excess supply of savings even at a zero interest rate. And thats our problem.
So what does government borrowing do? It gives some of those excess savings a place to go and in the process expands overall demand, and hence GDP. It does NOT crowd out private spending, at least not until the excess supply of savings has been sopped up, which is the same thing as saying not until the economy has escaped from the liquidity trap. 9

Therefore, by borrowing government wont compete with private enterprises. On the contrary, it will invest an amount of money, which otherwise would be useless. 5.2. Overall Debt Even though in a depressed economy the government borrowing wont increase the interest rate as discussed in the last section, the overall debt burden can still be a problem. First of all, investors can put the solvency of high indebted countries into question, when the debt levels are too high. As result of this loss of confidence in public finance, interest rates rise because investors consider riskier to put their money in high indebted countries. Ultimately the incapacity to borrow at reasonable interest rates may lead a country to a default. This is of course a terrible scenario since the government wont be able to fulfill its role properly. In the end, those who mostly depend on the state (normally the most in need) will suffer from the governments incapacity to finance its activities. This is exactly the trade-off policy makers face. Although public spending is clearly the way to take the economy out of the slump, the debt level the government can incur in is not unlimited. Too much debt is dangerous. Yet, to cut spending before the ideal point

Krugman, Paul R, Liquidity preference, loanable funds, and Niall Ferguson (wonkish) . The New York Times, May 2, 2009. . July 12, 2013.

means to sacrifice the unemployed and to leave the economy in the recession. Defining from which moment the debt turns out to be excessive is the question economists must deal with. In fact, thats what theyre doing right now. And, in doing so, some of them, specially in Europe, started to plead for more austerity. The argument was that due to high debt levels European countries were at the edge of a debt crisis. Is tightening public spending really the best solution for European problems? Are the supposedly high levels of public debt the origin of all trouble in Europe?

6. Austerity: Europes Big Delusion

In the beginning of the crisis, it was obvious almost for everyone that an expansionary policy should be adopted. But then the debt crisis struck Greece. Anti-Keynesians pointed out the dangers of a high indebted economy and advocated it was already time to take the policy measures that would ensure austerity: cut spending and raise taxes. The Greek financial crisis the soaring interest rates faced by the Greeks created the illusion that great part of the European nations problems were due to high levels of debt. The Hellenization of Europe i.e. the tendency to treat every European country with financial problems as Greece led ultimately to austerity policies10. The European Central Bank, responsible for supporting troubled economies, made the financial aids conditional upon budget cuts and deficits lowering. Despite saving the bank system of a massive bankruptcy, those measures had the effect of deepen even more the economic slump in an already depressed economy. Ultimately, the policies, which were targeted to increase investors confidence by reducing public debt, were responsible for the raising debt-to-GDP ratio, as can be seen in the graph on the next page. Of course, what led to an impressive increase in this ratio was the considerable economic slow down experienced by these countries. The debt was in fact reduced, but not in the same proportion as the economy slowed down. Thus, the negative effects in the economy of such measures have clearly overcome the possible gains of greater confidence. From the point of view of economic theory, such a result should even be expected. Krugman differentiates cutting spending in a depressed economy and in an economy near full employment. That basic distinction explains pretty well the lack of success related to the austerity policies:

See, for example: The Economist, Spains bail-out: Insuficiente, Jun 16th 2012.

Finally, even if one took warnings about a looming debt crisis seriously, it was far from clear that immediate fiscal austerityspending cuts and tax hikes when the economy was already deeply depressedwould help ward that crisis off. Its one thing to cut spending or raise taxes when the economy is fairly close to full employment, and the central bank is raising rates to head off the risk of inflation. In that situation, spending cuts need not depress the economy, because the central bank can offset their depressing effect by cutting, or at least not raising, interest rates. If the economy is deeply depressed, however, and interest rates are already near zero, spending cuts cant be offset. So they depress the economy furtherand this reduces revenues, wiping out at least part of the attempted deficit reduction.11

Not only the relation between debt and growth was affected. Even the major promise of the austerity program couldnt be held: confidence didnt rise. The interest rate for the PIIGSs bonds soared, despite all budget cuts, as Mark Blyth pointed out:
So PIIGS cut their budgets and as their economies shrank, their debt loads got bigger not smaller, and unsurprisingly, their interest payments shot up. Portuguese net debt to GDP increased from 62 percent in 2006 to 108 percent in 2012, while the interest that pays for Portugals ten-year bonds went from 4.5 percent in May 2009 to 14.7 percent in January 2012. Irelands net debt-to-GDP ratio of 24.8 percent in 2007 rose to 106.4 percent in 2012, while its ten-year bonds went from 4 percent in 2007 to a peak of 14 percent in 2011. The poster child of the Eurozone crisis and austerity policy, Greece saw its debt to GDP rise from 106 percent in 2007 to 170 percent in 2012 despite successive rounds of austerity cuts and bondholders taking a 75 percent loss on their holdings in 2011. Greeces ten -year bond currently pays 13 percent, down from a high of 18.5 percent in November 2012. 12

6.1. The Euro Penalty All the data until now presented is still not enough to defeat once and for all the austerity advocates. They still have the benefit of the doubt. It could be argued: if the austerity measures hadnt been adopted, things would be even worse and investors

Krugman, Paul R. End This Depression Now!. (W.W. Norton: New York, 2012), pg. 194 Mark Blyth . Austerity: the history of a dangerous idea. (Oxford University Press: New York, 2013), pg. 4.
11 12


could have completely abandoned the idea of lending money to countries in trouble. After all, money borrowed with high interest rate is better than any money at all. In order to deal with those further pro-austerity arguments and finally identify what is the real problem with some of the Euro-Zone countries, it may be necessary to take a closer look at other countries in similar situation, which, however, dont have the euro as their currency. Lets compare Great Britain with Spain. The former has a way higher debt-to-GDP ratio than the latter. Yet the British 10-year bond yield has over the past 10 years been below 4%, while the Spanish has never gone under the same 4%, as can been seen in graph on the next page. If the debt level is directly related to investors confidence, we should expect Spains capital cost to be lower. But that isnt the case. Moreover, Japan, whose public debt has recently exceeded 1 quadrillion ($16.74 trillion)13, but still has 0.72% yield on its 10 year bonds, is also an example proving the relation between debt and interest levels is not always true. The most convincing reason for why has Spain faced an imminent threat of a financial crisis is the fact the she doesnt have her own currency. Firstly, one should notice that, if Spain could print own money and control the levels of inflation, it should be able to reduce the real burden of its public debt by imposing a higher inflation than the actual Euro-zones. Secondly, controlling its own currency practically eliminates the risk of a freeze-up of liquidity. To understand this idea, one should keep in mind that public debts must often be rolled over. As the time comes when some the debts must be paid, governments normally issue more bonds, using the raised money to pay debtors whose credits are due now. However, it can happen that investors, for some reason, refuse to lend government more money. In this case, even solvent governments should run out of cash and be forced into default.

Phillps, Matt. With a quadrillion in debt, theres only one way out for Japan . Quartz, Aug 12, 2013. Aug 27, 2013.


British and Spanish Debt-to-GDP Ratio and 10Year Bond Yield


If a country goes through such a situation, it can avoid default on its debts by printing money to pay them. The Euro-Zone countries, however, dont have the possibility of rolling the public debt by creating money out of thin air, because theyre all under the European Central Banks jurisdiction. This single fact gives rise to the possibility of selffulfilling crisis: investors may fear a freeze-up of liquidity and for this reason they wont lend government money, turning the feared scenario into reality. Paul Krugman has called the euro penalty the higher taxes countries into euro have to deal with. Also a clear example is the difference of borrowing costs among Finland, Sweden and Denmark. Out of these three, only Finland has adopted the euro, and is the country facing higher interest rates, as may be expected.

7. Conclusions



High leveraged economies are more susceptible to financial crisis, because a small shock can lead to an widespread self-defeating liquidation effort along the economy causing deflation and starting a depression.


Hyman Minsky argued that a low-debt economy and the resulting stable financial system results on the decline of the overall perception about the real risk of lending and borrowing, setting the stage for a Minsky Moment.


The high levels of private debt and the efforts trying to reduce it are causes of the insufficient aggregate demand, which are characteristics of a depressed economy. The way out of the crisis which at first glance may seem paradoxical is more debt. This time, however, it should be public debt: government must step in not only lowering interest rates but also increasing public spending.


Nonetheless, policy makers must face a trade-off. Government spending cannot be increased without limits. Beyond a certain point, public debt can threaten investors and lead the country into default. Moreover, austerity advocates have argued that fiscal and monetary policy would work against each other: by increasing public spending, government would consume a scarce resource money contributing to a smaller private spending. These two facts led us to the two following questions: a. Does government spending defeat Feds expansionary policy? No. In a depressed economy, there are savings in excess even with interest rates near zero. This excess of money is to be borrowed and spent by government. b. Is already time for austerity policy, particularly within Europe? No. The data showed that austerity measures didnt solved European troubled countries problems. Instead, data shows an even worse situation before tax hikes and cutting on spending.


The allegedly high debt levels cant be blamed alone for the PIIGS economic problems. There are countries with much higher public debt, which can still borrow at lower interest rates. The advantage these countries have is to borrow in their own currency. While on the short run they dont face the risk of a liquidity freeze-up, on the long run the real burden of debt can be diminished through currency debasing. Paul Krugman called the euro penalty the higher interest rates faced by Euro-zone countries, which result from the absence of an own currency.

8. References
8.1. Books


Admati, Anat; Hellwig, Martin F. The Bankers' New Clothes: What's Wrong with Banking and what to Do about it. (Princeton University Press: Princeton, 2013) Blyth, Mark . Austerity: the history of a dangerous idea. (Oxford University Press: New York, 2013) Keynes, John Maynard. The General Theory of Employment, Interest and Money. (The MacMillan Press LTD: London, 1973) Krugman, Paul R. End This Depression Now!. (W.W. Norton: New York, 2012) Krugman, Paul R. The Return of Depression Economics And The Crisis of 2008. (W.W. Norton: New York, 2009)

8.2. Articles and Newspaper Minsky, Hyman P. The Financial Instability Hypothesis. Working Paper N. 74, May 1992. Krugman, Paul R. Liquidity preference, loanable funds, and Niall Ferguson (wonkish). The New York Times, May 2, 2009. . July 12, 2013 Krugman, Paul R. How Did Economists Get It So Wrong? . The New York Times, Sep. 2, 2009. Oct. 10, 2013. Phillps, Matt. With a quadrillion in debt, theres only one way out for Japan. Quartz, Aug 12, 2013. Aug 27, 2013.

8.3. Interviews FCIC staff audiotape of interview with Paul Krugman, Princeton University, Oct. 6, 2010.