Saturday, April 04, 2009

Krugman on Crisis

by Calculated Risk on 4/04/2009 07:36:00 PM

“I never imagined that these days I'd get to the epicenter, the place, the heart of the problem, by a commuter train on New Jersey Transit. But here it is. It's the crisis of our lifetime.”
Paul Krugman, April 3, 2009
From the Desert Sun: Nobel Prize winner Krugman shares harsh view on economic woes (ht Jonathan)
... "This is terrifying,” [Paul Krugman] said. “I did not imagine in my worst expectations that this would be this hard. I thought that we could sit down and sketch out the kinds of things, in principle, you could do to offset this type of global slump. But I never thought it would be this hard, in practice, to implement.”
...
Krugman said, the lesson from Japan is that countries facing a similar fate should be “very aggressive and cut interest rates early.”

And though the United States did - “unfortunately, it didn't turn out to be enough,” he said.

“Once you're in a world where there's just not enough demand out there and you're cutting interest rates down to zero, then you're in a world where the rules of economics go into reverse - much like ‘Alice in Wonderland,'” he said.
Jon Lansner at the O.C. Register has more: Krugman: ‘Maybe we need a new bubble to invest in!’ (excerpts from a Twitter transcript)
  • How did this happen? We forgot the Great Depression! We exposed ourselves 2 a repeat. May not be a repeat BUT close.

  • Debt levels before this crash approached pre-Depression levels. And we had “the mother of all housing bubbles.”

  • By one professor’s math interest rates should be at minus-8% based on the economy’s plight

  • Big banks are in trouble. Some insolvent. “Socialist” bank seizures in US every week. But giant holding companies?

  • Are we doing enough? If you think this ends soon, then “Yes!” But if this runs on then “No!” This looks inadequate.

  • Stock rally on good news? Not good news just things not getting much worse!

  • We are not clueless. We have not done enough. I am terrified. Hope we find the audacity to fix it.