Krugman: Delusions Of Recovery

[Kurt_and_Hunter]

September 5, 2010, 1:21 pm
Delusions Of Recovery

Paul Krugman


I’ve had a couple of conversations lately with people who follow politics and public affairs, but aren’t that close to the economic discussion — and I’ve discovered that there are two comforting delusions still out there.

Delusion #1 is that we’re on the road to recovery, just more slowly than we’d like; to be fair, the White House keeps saying this.

But it’s not at all true. GDP is growing below potential; employment, even if you focus just on private employment, is growing more slowly than the working-age population. If you ask how long it will take us to return to, say, 5 percent unemployment on the current track, the answer is forever.

Delusion #2 is the belief that the stimulus may yet do the trick, because there are still substantial funds unspent. I tried to deal with this last year. (http://krugman.blogs.nytimes.com/2009/12/27/stimulus-timing/) The level of GDP depends not on total funds spent, but on the rate at which funds are being spent, which has already peaked; GDP growth on the rate of change in the rate at which funds are being spent, which peaked last year. It’s all downhill from here.

http://krugman.blogs.nytimes.com/2010/09/05/delusions-of-recovery/

[Crazy Dave]

1. This is now the new normal

From now on this is how things are going to stay for at least another 10 years until the next depression comes along and then we'll all be told how great we had it right now.

I saw an article all yippee and yahoo about a 0.4% increase in consumer spending this summer. That's not even half of a percent and any educated person would call it flat instead of growth like the article was trying to spin it.

[lib2DaBone]

2. You can Huff and Puff and Blow Supply side Economics until you die...

Trickle Down DOES NOT WORK.

30 years of Reaganonmics should be enough proof.

When people have money to buy stuff... employers will add jobs.

It's called "DEMAND".

[xchrom]

3. A sad recommend. Nt

[Kurt_and_Hunter]

4. ...

[lunatica]

5. I'm sure feeling the pinch

as I start spiraling towards foreclosure. I'm already past declaring bankruptcy. I can make my mortgage and HOA but not my line of equity payments. Both are owned by GMAC so I don't know what will happen. Will they foreclose even if I dutifully pay the mortgage every single month?

Stay tuned I guess. As much as I stay up nights worrying about it there are so many others who are much worse off.