Nighttime Must-Read: Matt O’Brien: Worse than the 1930s: Europe’s Recession

Matt O’Brien: Worse than the 1930s: Europe’s recession is really a depression: “As I was arguing last week, it’s time to call the eurozone what it really is….

Six and a half years later, Europe has distinguished itself by not having much of a recovery at all. And, as you can see above, that’s about to make it worse than the worst of the 1930s…. It’s a policy-induced disaster. Too much fiscal austerity and too little monetary stimulus have crippled growth like almost never before. Europe is doing worse than Japan during its “lost decade,” worse than the sterling bloc during the Great Depression, and barely better than the gold bloc then—though even that silver lining isn’t much of one. That’s because, at this rate, it’ll only be another year until the eurozone is well behind the gold bloc, too. So how is Europe making the Great Depression look like the good old days of growth? Easy: by ignoring everything we learned from it….

The euro is the gold standard with moral authority. And that last part is the problem…. Europe is stuck with a fixed exchange system that doesn’t let them print, spend, or devalue their way out of a crisis. But, unlike then, Europe might never give it up. It’s a fidelity to failure that even the gold bloc couldn’t have imagined. And that leaves the ECB as Europe’s only hope—which means they’re probably doomed…. They have made a desert, and called it the eurozone.

IIRC, it was after 2010 that I decided that this was no longer the Great Recession, but rather the Lesser Depression. It is now starting to look as though that, too, is inadequate, and that in five years I will be calling what started in 2007 “The Greatest Depression”…