The return of depression economics

This is the short review of the book originally written by the noble prize winner Paul
Krugman. It contains the economics crisis that had swept all across Asia and Latin
America, which was like a disease that are resistant to antibiotics and many of the
countries were suffered with that disease. It contains theme related to crisis. In this book
he has shown how to regulate the failure of financial system and major steps to turn
around the world economy. The writer has expressed his view regarding how this
catastrophe can happen, how the victims can recover, and how we can prevent it from
happening again.
The 1990s Asian crisis sent chills on spine of every country
resembling the great depression might happen in near future. The economic growth
wriggle from side to side which made economist to add focus on long term economics
growth rather than short term. He marks that further study and investigation should be
done to solve the topic of depression.
The economics inevitably takes place in political context. The world
has been changed then it was few years ago without considering the fundamental
political fact. In 1990s china’s transformation failed because by the time billions of
people had abandoned Marxism. And nobody also doesn’t understands the cause for
the collapse of soviet regime, but still it maintained its grip to defeat Nazis. People who
lived under Marxism prepared to give markets a chance, which became least important
consequences of soviet collapse. The 1930s great depression was worst event in
economics because of happening terrible things. In 90s also terrible things happened,
world industry had fallen into its knees, the collapse in volume of world trade is faster
than in great depression. The supply shock and demand shock causes deflation and
cannot stop depression from happening.
In 1980s Japan had enormous bubble in stocks
and real state and bubble burst which slipped Japanese economy to recession and
remained in slumps and Japan experienced steadily falling inflation which became
deflation the interest rate came to zero . the major causes for the Japan crisis are
financial deregulation which removed government rules controlling the way that banks
operate ,the surplus of capital produced ,carelessness among the borrowers and
lenders ,and corruption among bank and governments. It has also been mentioned that
great depression would not have happened if central bank had taken action to prevent
sharp fall in money supply. when higher will be the amount of GDP lower will be the
amount of interest rate. If people save more than they invest the economy shrinks
because economy is saving equals to investment. There was a lot of lending ,borrowing
and leveraging up which resulted bank failures. And lots of foreign currency caused
their own currency depreciate. World war II caused massive fiscal stimulus which
produced full employment and shipping arms to Britain and no private borrowing in war
supported economy of US. Taking the role of shadow banking fed followed a move and
expanded the balance sheet targeting various interest rates in various markets.