Consumers are flat-out broke, and we’re finally beginning to understand that. So we’re finally cutting spending. But, in aggregate, the more we cut spending, the more broke we’re going to get–because the economy will suffer, asset values will drop, and many of us will pay cuts or get fired.
So what we really need, Krugman says, is for all of us to spend, spend, spend for just a little while longer to reinvigorate the economy…and then gradually, carefully, slow our spending and replenish our nonexistent savings while the economy sputters along.
But Krugman’s not an idiot. He knows that will never happen. So he once again stumps for the next best thing. MASSIVE fiscal stimulus, probably in the form of grants to bankrupt states and infrastructure spending.