Paul Krugman quotes Ken Rogoff, approvingly: " “The United States is going through a garden-variety severe financial crisis.” "
I think I understand where Krugman is coming from, with this, but I don't understand where he's going.
He's quite right, in the sense that economic analysis of the financial crisis and its economic consequences can go fairly far, by following quite conventional lines. As an economist, Krugman can feel that he "understands" many aspects of the crisis and its consequences, based on well-established theory.
But, seeing recent events in this way requires abstracting away from an historical context, and away from particularities, that make these events "epochal".
This crisis is a re-creation of the Great Depression. It isn't a matter of fatuous, Sunday supplement parallels. It is the consequence of policy, pursued relentlessly by political factions determined to undo the New Deal. And, it also represents the end of post-WWII American economic dominance of the globe.
These are not just rhetorical points about the supposed "meaning" of these events. There are real, abiding problems and political issues, which should not be abstracted away from: the U.S. needs fundamental reform, needs to depart from the course followed over the last 10 to 30 years.
It is not a "garden-variety" financial crisis in this very important sense: the status quo ante is not, in any way, a model of a sustainable "solution" set.
People have tried to say this in a variety of ways. One rhetorical formula was to emphasize that this was a "solvency" crisis, and not merely a "liquidity" crisis.
The importance of deliberate re-structuring puts reform front and center. This is clearly a challenge for regulatory reform. It is also a challenge for fiscal policy, which cannot just be a collection of Federal spending and tax-cuts, but something that begins to change the economic development course of the country. How this crisis is resolved will determine whether the country is able to revive, or continues to deteriorate.