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Krugman: American Economy Will Not Recover for a Long Time
Last week, Pimco's CEO said
that he doesn't think we'll have a v-shaped recovery, and that
economists, advisors and managers who have been counting on a v-shaped
recovery are ignoring the economic fundamentals in our economy.
Now, Paul Krugman is agreeing:
Plunging
prices of houses and CDOs ... don’t produce any corresponding
macroeconomic silver lining. ... This suggests that we’re unlikely to
see a phoenix-like recovery from the current slump. How long should
recovery be expected to take?Well, there aren’t many useful
historical models. But the example that comes closest to the situation
facing the United States today is that of Japan after its late-80s
bubble burst, leaving serious debt problems behind. And a
maximum-likelihood estimate of how long it will take to recover, based
on the Japanese example, is ... forever. OK, strictly speaking it’s 18
years, since that’s how long it has been since the Japanese bubble
burst, and Japan has never really escaped from its deflationary trap.This
line of thought explains why I’m skeptical about the optimism that’s
widespread right now about recovery prospects. The main argument behind
this optimism seems to be that in the past, big downturns in the
world’s major economies have been followed by fast recoveries. But past
downturns had very different causes, and there’s no good reason to
regard them as good precedents
- advertisements -
One of the many hurdles...
http://www.dailyfinance.com/story/public-pensions-face-2-trillion-defici...
Could be worse though....
http://rawstory.com/news/afp/Some_30_million_German_bank_cards_h_0105201...
Old news Krugman, try to keep up. I put the time until recovery at 13 years, so I'm more optimistic than you.
No kidding. With economists like you,why would the economy recover?I have yet to see a plan that tackles real economic growth from scratch,and not another borrow and spend plan by Krugman or any other Nobel prize winner for that matter.
What a shame that such an intelligent site got populated by so many right wing, racist nut jobs. There was a time when the comments sections had thoughtful comments from investors and traders and reading them was a welcomed reprieve from the monotony of my Bloomberg screens. I'll certainly stop wasting my time going forward. It is beneath you Tyler for tolerating such ignorance and nonsense.
You don't have to eat everything at the buffet table either!
just another painter trying to paint the landscape from his own skewed perspective! See the video on Detroit linked to above for a good look at what 50 yrs of left wing antics have resulted in....
Republican=Democrat=Criminal
We've passed the tipping point in our ability to accumulate new debt and service current debt....its a deflationary death spiral! Pretty soon the country will look like Detroit -
http://www.youtube.com/watch?v=1hhJ_49leBw
California is next...
http://www.federaljack.com/?p=13432
analysis on state unemployment borrowing - which doesn't show up in the budgets....
http://yophat.blogspot.com/
Krugman....sell-out remorse. And he's not a very good liar either.
You guys on this board who opine about how Krugman is such a dumb ass probably have no problem supporting the right wing bastards who through their overt support of deregulation to the detriment of the middle class have systematically destroyed the country. You and your ilk love to bash a union worker who might gain another dollar/hour but typically have no problems with the theft of billions via deregulation fiascos like the savings and loan crisis (thank you Ronnie) and the leveraged credit implosion (thanks Phil Gramm). While we are at it lets get back to some other good right wing concepts like doing away with child labor laws, womens right to vote, minority rights etc.. Yes the good ole days beckon in a Right Wing america.. I must say I am sad to see President Obama has tilted so far to the right in supporting Wall Street with massive bailouts. As Paul Volker indicated the only beneficial thing to come from "Financial Inovation" over the past 30 years is the ATM
Yawn.
What are you, 12 years old?
You need to rely on something more than an 8th grade "Social Studies" book for your political commentary.
Republican=Democrat=Criminal
Silly rabbit playing Democrats and Republicans is for kids.
Silly rabbit playing Democrats and Republicans is for kids.
You lost me at "probably".
I take it you don't read much on ZH?
I'd just junk the poor bastard but a) it's probably a troll that swung over from HuffPo b) anons can't tell when they've been junked.
On Judgment Day, everyone gets to see who you junked.
upside down v recovery
lmfao
gold ftw
Gold bitches!
Because someone had to say it.
Wow....
You mean Krugman sold his complete holdings ?
10 shares of Bogle's Vanguard SP500 Fund ?
Must give him some credit though,
It is more than Bernanke has at risk.
To be sure BB is getting 0%....
Krugman is such a tool. He is so amazingly inconsistent it boggles the mind. He wants the government to spend, spend, spend. Then he points to Japan's 2 decade long bout with deflation in spite of the fact that the Japan government has done nothing but print and spend money which is what he advocates. Less is more. Scarcity is prosperity. Suffering is happiness. blah, blah blah....
Right. Krugman says this. Krugman says that. So what? Piss on what he says.
Obviously not a single one of you know who John Rae is. This is all according to his plan, written 200 years ago.
OK, I'll play Jeopardy. Who is John Rae?
John Rae's "Sociological Theory of Capital" served as the inspiration for Fisher when designing the mechanics of Central Banking.
http://books.google.com/books?id=Qj0uAAAAYAAJ&printsec=frontcover&dq=ina...
Essentially Rae proposed that the best method for a Government to fund itself was to provide low cost housing for its citizen's and use the revenue obtained through rent.
Well, your first problem is you're using IE.
He should pay 2000 bucks and get an inferior computer from Apple with Safari instead, right?
?????????????????
Firefox is key to success.
To the editors - Sorry for my previous comment. Had I known copying and
pasting text from a word doc would result in this I would not have
bothered.
not sure why that first line of garbage text is still there. It doesn't show up in edit mode. Anyway, it's fixed.
You see the word "edit" beneath your messed up post? Only you can edit your post and that stays there until someone replies to your post. So hurry up and edit your post.
I wonder how many of you out there saw this report by the Association of Financial Professionals, a trade association including CFOs, treasurers, comptrollers, and risk managers of mid-sized and large corporation’s. The report asked over 1000 of these executives the question: “When do you expect your company to begin hiring again?”
The answer says all you need to know about the current economic crisis, and blows all happy talk out of the water.
This survey, funded by Wells Fargo Bank, shows that 26 percent of executives expect their company payrolls continue shrinking in 2010, while 46% more expect employment to stay at current low levels. Put another way, only 25% of companies expect to return to pre-recession hiring levels in 2011, while 32% don’t expect a hiring rebound until 2012. And fully 30% “do not expect their organizations ever to return their payrolls to pre-recessionary levels.”
In more troubling news, the same survey respondents say their companies’ access to credit has barely budged. One in six found credit a little easier to obtain in 2009, while one in five reported it was harder to obtain credit. So much for the Federal Reserve’s vaunted efforts to throw money--literally trillions of dollars--at the banks so they would start lending.
More than half the executives responding said if credit doesn’t become more accessible by mid-2010, their firms will take further steps to conserve cash--steps including cutting capital spending (68%), freezing or cutting hiring (62%), cutting inventory (25%), delaying payments to suppliers (23%), tightening credit to customers (23%) and drawing down existing credit lines (22%). All of these steps would put a further drag on the economy and could push it into a second downward spiral.
The bad news from finance executives lends added weight to a warning by Nobel economist Joseph Stiglitz who says there is a "significant chance" the US economy will slip back into a decline in the coming year, going from a U-shaped recession to a "W-shaped" one--a dreaded double-dip recession, with slumping economic activity leading to worsening layoffs, and more bankruptcies.
Stiglitz, a former chief economist at the World Bank, says the government should act now to help state and local governments, which are running out of money, and to create new jobs.
i may be considered lazy by some to ask for a link to the aforementioned survey? or is it not publicly available?
+1
Very, very important addition. From Wells Fargo? Hmm.
'W' recovery in Fedspeak: lightning bolt recovery, from Zeus. There is no upside.
Word. +1
Don't mix economics with the S&P people. You will always lose.
There is $750 B of your money on the bid till the Congress takes it back.
The Japan comparison is just lazy, lazy, lazy. Japan doesn't get its deficits financed externally and is a far less domestically oriented economy.
Basically, China has to keep funnelling money your way otherwise you are fucked but China has to keep funneling the money because if you don't buy dildos and cheap TVs, they are fucked. Japan falling off a spar didn't rain on anyone's parade.
LOL, my friend calls him Krudman, and while I admire the man's contributions to economics, he's wrong on this call. Dead wrong. Forget today's pending home sales and hone in your attention on Friday's jobs report. Pending home sales will come back and fell mostly because of the expiration of the first-time homebuyer tax credit, which has since been extended to cover purchases until April 30th. Regardless, jobs, jobs, jobs are all that matters now, so pay attention to payroll figures and revisions to previous reports.
As somebody who checks the jobs markets daily, I've noticed a drop in job postings over the last two months, and even more so over the last three weeks or so, which is probably attributed to the holidays.
Still, there are a lot less jobs posting than there were in October / November.
Leo: I'm watching for this call, since I'm perched in an American business and have a pretty good vantage point, and I say this year is all about hanging on and preserving capital, not hiring. I see no rebound - I'll be delighted if I am wrong, although I will not understand why the jobs improve - ruling out of course outright BLS fabrication. And December is not reliable, I need 3-4 months in a row.
Just sayin'
Leo - Speaking for myself I wouldn't even use the paper the government wastes on their employment reports to wipe my ass. Ever since Bush gave Baghdad Bob a job at commerce and Obama promoted him to head the BLS only to prove the Will Hunting premise my confidence in whatever my government tells me is exemplified by the governments own actions and efforts to make a game of confidence. While I am in agreement that jobs, especially jobs that actually pay a wage are of vast importance I could not disagree more that whatever the government has to say is of any importance. Except to those who trade around such things.
All well and good except that the first time homebuyer credit never actually expired. It was extended before it expired. Are you suggesting that fear of expiration actually pulled demand forward?
I hope you are right, Leo. Don't forget that the pending home sales figures are based on contracts written but not closed. My wife is a realtor, with three contracts written in November 2009. None of these is going anywhere because the banks won't close since they would have to book the losses. The housing market continues to be in the shitter and will be that way for a long time.
I'd add to that - is an increase in existing home sales necessarily a good sign? maybe for realtors it is unambigously good, but if an increase in transactions is a result of servicer capitulation and liquidation of the mountain of defaults they are servicing, at fire sale prices, that will bring a lot of pain to a lot of companies.
The government's goal is to trickle out home sales to try to kick the can down the road. From their standpoint low homes sales numbers = good.
Agreed. Sales of existing homes puts groceries on the tables of real estate agents. New homes help feed and house contractors, subs, timber firms, employees of John Deere and Caterpillar, Home Depot, concrete companies, etc. The pain will be long felt.
Housing turnover keeps realtors employed.
TPTB are desperate enough to consider that as progress.
Ghost, trusting anything put out by Yun's shop is equally suspect. I still look at the total transfers of title as registered by the counties to provide the figures to watch.
Even Paul Krugman is agreeing?! Who next, Leo Kolivakis? What is this, the end of days?
if he doesnt agree he will loose all credibility when the bottom falls out. so he has to put a few bearish articles
No, you have it wrong. None of you are understanding Krugman correctly.
His point is that since we did not apply sufficient stimulus (according to him), there will be no "V" shaped recovery.
Krugman's oft-stated recipe for a "V' shaped recovery requires stimulus in an amount that is just ever-so-slightly-less than that required to plunge the government into a compound debt trap.
His logic is as follows- Since we didn't listen to him and do that described above, we are now stuck with a sub-par "recovery" or no recovery at all.