Ever skeptical of doomsday talk, my pen-pal Fred Hapgood has finally acknowledged that the current recession is fundamentally more serious than any before it. I'd warned him that this downturn contains the spores of a deflationary depression, but as always, he only wanted to know ' not unreasonably ' how I will be able to recognize if and when I am wrong. I had just sent him a particularly disturbing essay in which NYU professor Nouriel Roubini laid out the case for an economically ruinous debt deflation. Roubini prefaced his thoughts with this remarkable insight from John Stuart Mill: 'Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." Fred's response, as always, was skeptical: 'The current recession, or whatever you call it, is interesting to me mostly in providing the severest test to date of catastrophism, or whatever you call your system,' he wrote in an e-mail. 'Do you see it that way? Suppose a year goes by without unemployment ever coming near double digits, the Dow falling below 10K, the GDP ever even approaching 10 trillion, or whatever other measures you care to define. Will you then admit your ideas have been fairly tested and failed? Two years? Three?' I replied as follows: 'I don't have a catchy name for my point of view, Fred, only a deep sense of foreboding that America's standard of living has lurched into intractable decline and that at least a generation will pass before we can begin to reverse the trend. The slippage in 2008 alone has been so steep that most Americans probably think that it cannot persist at its current rate. Tragically, they are about to be proven wrong. 'Whatever happens, I would sooner trust optimists
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