Krugman: 'We’re still near the bottom of a very deep hole'

[Newsjock]

Source: New York Times

If there’s one piece of economic wisdom I hope people will grasp this year, it’s this: Even though we may finally have stopped digging, we’re still near the bottom of a very deep hole.

Why do I need to point this out? Because I’ve noticed many people overreacting to recent good economic news. What particularly concerns me is the risk of self-denying optimism — that is, I worry that policy makers will look at a few favorable economic indicators, decide that they no longer need to promote recovery, and take steps that send us sliding right back to the bottom.

... Now do the math. Suppose that the U.S. economy were to grow at 4 percent a year, starting now and continuing for the next several years. Most people would regard this as excellent performance, even as an economic boom; it’s certainly higher than almost all the forecasts I’ve seen.

Yet the math says that even with that kind of growth the unemployment rate would be close to 9 percent at the end of this year, and still above 8 percent at the end of 2012. We wouldn’t get to anything resembling full employment until late in Sarah Palin’s first presidential term.

Seriously, what we’re looking at over the next few years, even with pretty good growth, are unemployment rates that not long ago would have been considered catastrophic — because they are. Behind those dry statistics lies a vast landscape of suffering and broken dreams. And the arithmetic says that the suffering will continue as far as the eye can see.

Read more: http://www.nytimes.com/2011/01/03/opinion/03krugman.html?partner=rssnyt&emc=rss

[Skittles]

1. yup

absolutely correct

[applegrove]

2. I only hope Obama listens to Krugman this time around.

[defendandprotect]

3. k/r -- also sets us up to getting used to higher unemployment rates .... living with them....

while we also know these percentages don't even reflect the truth of the

nemployment problem in America -- the homelessness, the poverty -- !!

[DJ13]

4. Joseph E. Stiglitz

It has become fashionable among politicians to preach the virtues of pain and suffering, no doubt because those bearing the brunt of it are those with little voice – the poor and future generations. To get the economy going, some people will, in fact, have to bear some pain, but the increasingly skewed income distribution gives clear guidance to whom this should be: Approximately a quarter of all income in the US now goes to the top 1%, while most Americans’ income is lower today than it was a dozen years ago. Simply put, most Americans didn’t share in what many called the Great Moderation, but was really the Mother of All Bubbles. So, should innocent victims and those who gained nothing from fake prosperity really be made to pay even more?

Europe and America have the same talented people, the same resources, and the same capital that they had before the recession. They may have overvalued some of these assets; but the assets are, by and large, still there. Private financial markets misallocated capital on a massive scale in the years before the crisis, and the waste resulting from underutilization of resources has been even greater since the crisis began. The question is, how do we get these resources back to work?

Debt restructuring – writing down the debts of homeowners and, in some cases, governments – will be key. It will eventually happen. But delay is very costly – and largely unnecessary.

From:
New Year’s Hope against Hope

http://www.project-syndicate.org/commentary/stiglitz134/English

[Golden Raisin]

5. Perhaps if we weren't

pissing billions every month down the black holes of Iraq and Afghanistan we might be helping our deep hole at home to recover.

[Safetykitten]

6. He must not be reading this site. We are in the money and all is good.

[moondust]

7. Robert Reich

~snip~

(In 2011) The two American economies — the Big Money economy and the Average Working Family economy — will continue to diverge. Corporate profits will continue to rise, as will the stock market. But typical wages will go nowhere, joblessness will remain high, the ranks of the long-term unemployed will continue to rise, the housing recovery will remain stalled, and consumer confidence will sag.

The big disconnect between corporate profits and jobs is likely to continue because America’s big businesses are depending less and less on U.S. sales and U.S. workers. Their big profits are coming from two sources: (1) growing sales in China, India, and other fast-growing countries, and (2) slimmed-down US payrolls.

~snip~

In other words, whether 2011 is a great year economically depends which economy you’re in – the one that’s rising with the profits of big business and Wall Street, or the one that will continue to struggle with few jobs and lousy wages.

~more~

http://robertreich.org/post/2520478548

[Angry Dragon]

8. Slip, sliding away

I am just glad I am older, I would not want to be someone that is in their twenties or thirties.....

[Major Hogwash]

9. Geez, why be so optimistic Krugman? Why don't you just tell old people to pull the plug now.

"Get it over with, you're going to die sometime anyway."

After ripping President Obama and the Democratic party apart for the better part of the year, all of a sudden Krugman realizes that the House of Representatives will be controlled by the fucking Republicans for the next 2 years.
Wow, what a seer! What a soothsayer! What a sage!


"We wouldn’t get to anything resembling full employment until late in Sarah Palin’s first presidential term."

Who is living in la-la land now? President Sarah Palin? WTF have you been smoking dude?

[mmonk]

10. People invoke Palin to try and scare some sense in people.

[TBF]

15. Palin shot herself in the foot by resigning from her job in Alaska -

no moderates are going to vote for that fool. There are other republicans they will vote for though, and Obama is handing it to them.

[mmonk]

18. True and I think Krugman knows that.

But he can't grab anyone's attention by mentioning someone else. And Palin's views in the broad sense are shared even though her persona is considered extreme, even by the unassuming Republican politician.

[Flubadubya]

11. Dude... Hogwash...

Ever heard of "tongue in cheek"? Do you really think he expects Palin to become president? Bwahaha!!!

[TBF]

14. It is not Krugman's fault that Obama is supporting conservative policies -

when he loses in 2012 he has only himself to blame.

[Statistical]

16. WOOSH ! ! !

[Cutatious]

12. No, we are not anywhere near the bottom

There is still a very long way to go down. Let's hope we don't go there.

[mmonk]

13. When we finish dismanteling the safety net, we will be there.

It's the only thing preventing it right now.

[Statistical]

17. Of course we are.

Just like the fools who claimed U-3 would go to 25% and the DOW to 5,000 they lacked understanding of economics.
There will always be demand for goods & services (even if it is survival goods & services - food, energy, shelter).

There are limits on how far down we can go before things start to look too attractive to pass up. Housing might fall another 10% to 30% in some markets but even then at 30% down houses are going to be priced well below rents. People will step in to buy them because the sheer amount of money that can be made.

[indepat]

19. Bad as it may seem, thank God our most affluent got their tax cuts extended and

that those tax cuts will likely be made permanent (to be funded by slashing social security benefits of course, but that is a matter for another day). ;)