With the public funding taps (ie. stimulus packages) being closed off and fiscal austerity being ushered in, many are keen for us to move into post-recession. However some, including Paul Krugman, argue that this is premature and is, in fact, evidence that we never learned from our policy errors of the Great Depression:
“We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.” -Paul Krugman
There are two opinions at play here. The first argues that recovery has taken hold and it’s time for governments to cut spending and raise taxes (to pay for all that stimulus funding). The Krugmans of the world, however, argue that “savage cuts in public spending” will only worsen the situation unless the private sector is ready to take over. The idea, of course, is for governments to spend when the private sector isn’t — like today.
But ultimately it comes down to this: Has the economy recovered or was our recent period of growth strictly a result of government stimulus packages? The implications for the global housing market are obviously huge.
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