The Return of Depression Economics

Surely the Great Depression could never happen again. Or could it? One of the world's top economists gives us a sobering tour of the global economic crises of the last two years - six Asian economies have experienced a slump that bears eerie resemblance to the Great Depression. Russia, once a military superpower, defaulted on its debt in 1998, an event that, halfway round the world, drove Brazilian interest rates through the roof and terrified the US bond market.

Some of the brightest financiers in the world, working for Long-Term Capital Management, thought they had the market licked only to find themselves in a fix that had all the makings of the over-leveraged positions that caused the 1929 stock market crash. Then, in January 1999, it was Brazil's turn, experiencing a financial crisis and currency devaluation that is still playing itself out. Paul Krugman recounts these events and more: he points out that they raise significant questions for which economists may not have the answers.