Krugman: American Economy Will Not Recover for a Long Time (18 yrs)

Zero Hedge ^ | 01/05/10

[TigerLikesRooster]

Krugman: American Economy Will Not Recover for a Long Time

Submitted by George Washington on 01/05/2010 15:59 -0500

Japan Krugman Paul Krugman recovery

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

[Jack Black]

Ping

[Wolfie]

Which means no recovery at all. The bubble makers are still in business (over $300 trillion in derivatives alone), and the boom-bust cycle is running at about 20 years.

[wardaddy]

I daytraded CMGI too....it was always high volume

[stephenjohnbanker]

When I saw it had no chance of turning a profit, I pounded that sucker ;-)

[Diana in Wisconsin]

Krugman is wrong. It’s going to happen in 15 years, two months and 22 days.

Now...where’s MY Nobel? *SNORT*