Krugman: “What we’re seeing is stabilization...the great freefall and the nosedive seems to be over"

[ProSense]

U.S. Economy May Have Reached ‘Trough,’ Krugman Says (Update2)

By Shamim Adam and Liza Lin

Aug. 9 (Bloomberg) -- The U.S. economy is stabilizing and may have bottomed out, as the government’s stimulus plan probably saved a million jobs, Nobel Prize winner Paul Krugman said today.

A second stimulus package for the economy is still needed, and should be directed at state and local governments as well as infrastructure spending, he said in an interview in Kuala Lumpur. The world economy may face several years of weak growth without falling into a “double-dip” recession, he said.

“It’s quite possible, though not certain, that retrospectively, we’ll say that the recession ended in July or August, maybe September,” Krugman, 56, said. “My guess is that we’ve bottomed out now, that August was probably the trough month.”

The pace of U.S. job losses slowed more than forecast in July and the unemployment rate dropped for the first time in more than a year to 9.4 percent. President Barack Obama said the unemployment numbers indicate “the worst may be behind us” for the recession.

The Commerce Department reported July 31 that U.S. gross domestic product shrank at a better-than-forecast 1 percent annual pace in the second quarter after a 6.4 percent drop in the prior three months.

“What we’re seeing is stabilization,” Krugman said. “We’re seeing that the great freefall and the nosedive seems to be over. It’s leveling out but that is very different from returning to normality.”

more

[Peacetrain]

1. Well, okay now

[tabasco]

2. My republican acquaintances will be outraged!

They want the country and the economy to fail.

[Mudoria]

16. A small segment of DU will be outraged as well...

just check any thread with any economic news that shows things may be improving.

[MADem]

25. Ah yes, the Doom And Gloomers.

They're determined to keep that glass half empty.

[Scarsdale Vibe]

42. I prefer the term Disaster Fetishists

[Jeff In Milwaukee]

43. Chief Economist Dita Von Teese

!

[Uzybone]

97. DUzy

[ChimpersMcSmirkers]

22. Boy they sure do. I was reading some comments on the employment numbers

on marketwatch and man they are falling over themselves predicting a market crash, calling the jobless numbers a fraud, and generally praying that the economy goes down the toilet. The enjoyable part is that they are making financial decisions based on their hatred for the president. I'm sure that's going to pay off.

:rofl:

[babylonsister]

3. This is guaranteed to annoy people. Rec'd. nt

[Botany]

4. So the Kenyan Muslim Socialist Marxist anti American did the job?

:rofl:

[Peacetrain]

5. ....

:fistbump:

[tridim]

6. You forgot Nazi.

That trumps everything else, until they start calling him Satan.

[Botany]

35. I forgot community organizer, liberal, and unqualified too.

I always loved the right's use of community organizer as a pejorative against him.

Family values, Christian values, and economic values ..... BTW it also let him put together
a first class campaign that just kicked some major ass.


BTW they already are calling him Satan

http://www.youtube.com/watch?v=cjFoT-sj5Do&eurl=http%3A%2F%2Fvodpod%2Ecom%2Fwatch%2F1657388%2Damazing%2Devidence%2Ddoes%2Dbible%2Dprophecy%2Dreveal%2Dobama%2Dis%2Dsatan&feature=player_embedded

[tanyev]

92. I'm sure anti-Christ is already out there.

[dionysus]

17. get it straight.. it's "muslin"

;)

[Cha]

49. Yeah, nice 100%

Organic:)

[Phx_Dem]

34. Who knew! lol

[Uzybone]

7. The Krugmanites will now have to disown him

the worst is behind us, thanks in large part to this admins actions. Unemployment will almost certainly reach double digits but this would be unbearably worse if the opponents of this admin had their way.

[depakid]

38. It's impressive how few ever bothered to read what Krugman actually had to say

and how many have such a shallow understanding of economics.

Manichean thinking is as apparent on the left it seems, as it on the right.

[wininboy]

85. Agreed

All they really understand is that once upon a time, Krugman said something bad about Obama.

And true to form, they think this collumn is somehow lauding Obama

[angee_is_mad]

8. Finally Krugman

Thank you.

[BlooInBloo]

9. No it hasn't. I know this because DUers say so.

[DevonRex]

12. Those are real teenagers typing those words. Don't mock them!

They're sensitive, you know. And their acne might break out again if they get all stressed out. :scared:

[dionysus]

19. b-b-but, if the economy recovers, how can we overthrow the system and install a marxist system?

:rofl:

[Pirate Smile]

21. LOL.Damn Obama for saving the US from a second Great Depression.

That bastard!
















;)

[Zynx]

31. Despite what they say, they would have hated FDR too.

[Pirate Smile]

62. They did. They was a group that despised FDR - he was a "traitor" to his class.

[DevonRex]

10. Well, well, well. If Paul stays it's stabilizing, then it is.

I've been told that Krugman is always right.

[Hansel]

28. and a Nobel Prize winner.

Don't forget that.






Edited

[DevonRex]

40. How could I have forgotten? My bad.

:rofl:

[Kaleko]

44. If an expert like Krugman says it is stabilizing, his assessment carries some weight.

Unlike the opinions of armchair prophets on the web who keep predicting whatever excites them the most.

[tabatha]

11. But, not all the stimulus money has been used.

< 20% ?

[Botany]

15. and he will use the rest for green energy, health care, jobs, education ...

.... roads, CO 2 reduction, and all kinds of stuff that will help our economy in the long run.
You know investments.

[tabatha]

20. Yep, that will be the "second" stimulus.

[Zynx]

30. Krugman is of the view, and he is right, that we need to get to robust growth quickly

to bring down unemployment in a meaningful way. If we could quickly get the growth rate up to, say, 4-6% we would see some job gains.

[Mayberry Machiavelli]

13. Obama's number one job taking office was to prevent the complete collapse of the US economy.

He's done that.

If this result appears solid over the next few months that needs to be the talking point of the Democrats, regardless what happens with health care.

[Dreamer Tatum]

14. Moronic to say this in the summer

The job numbers, which always sag around summertime due to graduation and school being out, have no chance of looking better until Fall, at best.

Krugman, technically correct though he may be, will look foolish when August and September job loss numbers come through.

[ProSense]

18. Or maybe

this comment will still be viewed as moronic in September. We'll see.

:rofl:

[dmallind]

27. Why?

Most of us know that jobs are a lagging indicator and recovery in employment comes well after the economy as a whole starts improving. Notice he's claiming it has stabilized, not that everything is wonderful.

[Zynx]

29. Jobs numbers are subject to seasonal adjustments.

Actually, he might benefit from something that people have not noted. There was less seasonal hiring in June and therefore less seasonal firing will happen in late summer. Thus, the adjustments will show gains relative to where they otherwise would have been.

[tomreedtoon]

91. Us unemployed folks would disagree.

And we don't see much hope, with a lot of retail spaces going empty, a lot of chain restaurants folding and car lots looking like the Sahara on a bad day. Has anyone in your town found a use for those massive empty Circuit City stores yet? I didn't think so.

There is nothing to provide jobs. Not even Wal-Mart is hiring. Where are these hypothetical jobs going to come from?

[Loge23]

23. Stabilization is not growth.

I don't understand the "I told you so" attitude that some derive from Krugman's comments.
Krugman offers no concrete evidence or even hope that growth is imminent - indeed, he is quoted as predicting a "very long time" for any sustained recovery form this debacle. From my point of view, in business in FL, there are no signs of any recovery. I welcome at least a temporary reprieve from the landslide though.
And what will recovery masquerade as? Another bubble, like the one currently inflating Wall Street?
The fact is, the economy has changed and the old paradigm of recovery or growth is long dead. We really don't know what the recovery will look like anymore. After all, we spent the entire last boom in a totally manufactured fairy land. The sleight of hand trick that produced this illusion was simply a heist by the bright thieves of Wall Street who recognized an opportunity to defraud Americans via the promise of brass ring when the carousel stopped. Can't really blame them - most Americans can barely name what fund they are in let alone what companies make the fund up. We'll believe anything that another red, white, and blue striped American tells us, in general. When your entire purpose in life is to churn money, you find it wherever you can. Low hanging fruit is the easiest pickings.
Strip away all the bullshit and you'll get back to finite money supply - even as the printing presses rumble. Where's all the freakin' money??

[newinnm]

24. Really? Stabilization isnt growth

Do tell

[wininboy]

86. With 150,000 people entering the workforce every month

stabilization means "increased unemployment" and "smaller slice of the pie"

[tridim]

33. Was the "growth" under BushCo actually growth..

or was it BS bubbles and corporate theft that simulated growth?

Is that what you want to go back to?

[Loge23]

50. Where did that come from??

Where in anything I wrote could you possibly cull that suggestion??
Did you read my post?
Jeez, this board is hardly worth it anymore.

[bertman]

65. It came from the same mindset that freaks every time someone suggests that President

Obama has not saved the world!!!

You are correct, Loge23. Stabilization is not growth. It's just that we have (hopefully) hit bottom. If we're lucky the tide will begin to rise ever so gradually next year. If we're not lucky--and Krugman has said this numerous times--we may be looking at some bleak YEARS at the bottom.

While I'm delighted that we may have hit bottom, I wonder how the uptick is going to affect our economy. If past experience (the last 30 years) is any indicator, we will continue to see the middle class shrink, the lower class expand with no expectation of help or wage/benefit improvement, and the aristocracy consolidate more wealth.

In the last two or three weeks my business has been getting more leads than we have in the last seven months. I say leads because the market is so slow and the competition so fierce that those leads may not become jobs for us. But hopefully some will. I hope things pick up soon in your area.

Don't give up on DU yet. We need to hear some rational responses from folks other than the cheerleaders.

[Loge23]

71. A reasonable voice heard from!

Thanks Bertman!
I'm not looking for people to agree to me. I'm just looking for a sensible, thoughtful exchange of opinions.
One response challenged my opinion that stabilization does not equate growth by stating, "do tell"!
The next one flames me for something that clearly was not in my post!
Thanks for responsing with a real life portrait of what is happening in your corner of the world. I remain hopeful for a meaningful recovery and I certainly continue to hope that President Obama succeeds brilliantly. I am not at all regretful that I voted for him but I do have expectations and I will continue to voice the same.
Thanks again - you made my day!

[bertman]

77. Glad to make you feel better, Loge23.

:hi:

[bertman]

78. Duplicate post

[jeanpalmer]

81. Good points

Any respite is welcome, but it's a sad state of affairs when the loss of 247,000 jobs is viewed as a positive.

There are many people, particularly in the government and in the media, who are trying to convince people that stabilization does = growth. The statement that the recession has ended is meant to convey that message imo. I think it's even misleading to say we've hit bottom. In terms of GDP, maybe. But a drop from 700,000 job losses a month to 247,000 shows we're still losing jobs -- that's not a bottom. A bottom occurs when job losses = 0 imo. I know what they're trying to convey, but in this case of job losses they are technically inaccurate. It's kind of like looking at a chart of a stock and saying that because the price has fallen for 3 days, it will fall on the 4th day. Same thing with their chart of falling job loss numbers.

"what will recovery masquerade as?" I'm trying to figure that out too. Who will hire all the people who were employed in bubble jobs in finance, housing and retail? If we don't have another bubble, how will they become re-employed. I don't think it will happen. The trend is in the opposite direction -- permanent job losses. From jobs being shipped overseas to labor being replaced by computers and machines, demand for labor is in a permanent decline imo. We have been in that trend for some time, but that trend was masqueraded by bubbles. They created a lot of silly jobs that are gone forever, probably.

Couple these permanent job and income losses with people's inability to extract the equity out of their homes and spend it on consumption, and you can see fudamentally why the trend in these numbers may not be destined to turn positive.

What's bothersome is the policymakers' refusal to face up to these facts. So that the fundamental problem can be addressed. Instead, it looks like we're getting an effort to create another bubble.

[pokercat999]

26. What we’re seeing is stabilization,” Krugman said.

Translation: We've hit the bottom of the L........maybe.

To quote Robert Reich a couple of weeks ago..."what economy?"

[Phx_Dem]

32. At least Krugman can admit that Obama's economic policies are

working after months of screaming that his economic policies would make things worse. Good for him for having the decency to admit things are looking up!

[stubtoe]

41. Yeah, that's a turnaround.

Just goes to show, anything can happen.

[depakid]

45. If you read the article- you'll note that's not what he said

A second stimulus package for the economy is still needed, and should be directed at state and local governments as well as infrastructure spending, he said in an interview in Kuala Lumpur. The world economy may face several years of weak growth without falling into a “double-dip” recession, he said.
.....

“What we’re seeing is stabilization,” Krugman said. “We’re seeing that the great freefall and the nosedive seems to be over. It’s leveling out but that is very different from returning to normality.”

[dionysus]

64. holding onto that anger as tightly as you can huh.

[vaberella]

66. +1. Ha! n/t

[depakid]

72. Just being honest in the analysis- something all too many Americans

on both sides have forgotten- if they ever knew- how to do.

Part of the reason the country's in such sorry shape compared with other nations.

[mkultra]

68. "the government’s stimulus plan probably saved a million jobs"

[depakid]

73. It probably did!

That wasn't the point Krugman and many others were making over the winter and into the spring.

Short memories apparently run alongside the inability to do honest analysis.

[mkultra]

84. i admit that i have little recollection of Krugmans predictions

All i know of him are what his fan boys would bring here and try to hit obama over the head with. I gave him only moderate credence then and the same now. The economy is moving exactly as predicted and unless i see something odd happen, i refuse to be outraged.

[quaker bill]

36. The economy always

was going to recover, that is why they call it the business cycle. The question always was how deep the correction would go. I believe it could have gone much deeper without the intervention. While I am no fan of bailing out banks, it was a necessary thing to stop the bleeding. The same can be said of the automakers. It is hard to tell where the tipping point is that leads to a much deeper trough, but I am convinced we were and still remain fairly close to the edge. Every uptick in confidence is a step back from the edge. Much work remains to be done, however I have been convinced that if it was at all possible, better economic times would brought about well in advance of November 2010. It seems we are on track to expect a very good political year in 2010.

There are still about 200 elected republicans left in DC, perhaps we can pare this down to something more manageable.

[Lord Helmet]

37. k 'n r

[geek tragedy]

39. He's an Obama fanboy cultist cheeerleader.

According to the wise and PURE here.

[vaberella]

67. Are you kidding? Majority of the Krugman fanboys/girls here think

he's Obama's logical and brightest critic. In effect, everything Obama does is wrong economically and everything Kurgman says is right because it destroys Obama's views.

[mkultra]

69. only on opposite day

[DCBob]

46. About time.. many saw this coming weeks ago. However, we are not out of the woods yet..

Unemploymnet will likely stay high and the enormous debt will at some point come back to bite us. But clearly it could have been much worse and Obama gets the credit for keeping us from falling into a depression which many were predicting.

[Odin2005]

47. The ideologues on both sides are gonna be pissed.

[Yavin4]

48. Funny, Krugman Is No Longer Calling for Bank Nationalization

Remember that? Remember how a lot of folks here on DU and elsewhere were demanding that the banks be nationalized in order to save the economy?

Remember that? Not so much these days, huh?

[DCBob]

51. Yep, I do remember that..

Funny how even "geniuses" can be wrong.

[depakid]

52. Would have been by far the wiser move

Would have allowed the government to de-consolidate the "too big to fails" and put the resultant institutions in a much stronger position than they currently are- while at the same time, controlling exorbitant bonuses and not rewarding those who caused the meltdown in the 11st place.

Same thing the FDIC is STILL doing every week with smaller banks- except that it would have killed more birds with less stones.

Now, we're stuck with the very same problem as before- but without the political power or popular support to deal with it.

Yep- heck of job.

[dkf]

53. Nope. It was a bad idea as obviously we are okay without it.

You would have destroyed who knows how much of the stock market's valuation. Apparently you don't appreciate that a huge portion of the country's rejuvenated confidence is because the stock market is no longer in free fall. Uou don't see the lack of confidence that would still be in effect if all that value was lost forever as nationalization would have done.

[geek tragedy]

54. Bank nationalization was the dumbest idea advanced at DU

in years.

The government would have wound up selling Citibank and Bank of America to Goldman Sachs and JP Morgan Chase. That would have been just swell.

[depakid]

57. If you read the arguments by economists outside of DU

You'd realize why this was wise- and why Goldman and Chase wouldn't have been the beneficiaries of de-consolidation.

[depakid]

56. Of, I get it- but what could and should have been done was actually DEAL WITH THE PROBLEMS

and the stock market(s) would have followed suit. New, smaller- more focused companies would have been on the market- one's not to big to fail and less likely to engage in über risky practices.

Instead- what you got was the status quo- with EVEN LARGER corporations run by the very same folks- who can and will behave this way again.

Had you simply done with the B of A and Citi something akin to how GM and Chyrsler were dealt with- or the way the Resolution Trust Corp handled things after the Saving & Loan, we'd have all been much better off.

Instead, you've simply set up a repeat performance down the line.

Had the chance to fix things- but blew it by coddling Wall Street fat cats rather than providing a dose of accountability.

Like I said- heck of a job.

[dkf]

79. If the goal is to simply make these banks smaller

you do the same thing they did with the Bell system and legislate it. There is no need to nationalize.

http://en.wikipedia.org/wiki/Bell_System

[paulk]

55. that's a mischaracterization

nothing he says here is a retraction of his position that the economy would be better off in the long run if the banks were nationalized.

[Yavin4]

59. Krugman Warned That Without Nationalization, The Economy Would Collapse

We didn't nationalize, and now the economy is stabilizing. So, he was wrong.

Nationalization would have made things far, far worse. You would have wiped out all stockholders, and there would have been real panic in the streets.

Instead, the markets have re-gained a huge portion of their values, and as a result, the economy is stabilizing.

[paulk]

75. how wonderful, the markets are doing well

blah, blah, blah

he never warned that the economy would collapse w/o nationalization, he warned that an ecomomic recovery would take much longer without it. And, despite the cheerleading on this thread, Krugman's column isn't exactly the ringing endorsement one might suppose. He still calls for a 2nd stimulus, one aimed at creating jobs. He still warns that we, despite encouraging signs, are hardly out of the woods, especially if we have another one of those jobless recoveries that Republican administrations were so good at.

I would hope that Democrats, and the Democratic Party, look beyond the markets for their definition of a stable economy.

[girl gone mad]

76. bullshit

Krugman said we would face decades long Japanese style stagnation if we refused to deal with our zombie banks, a threat that has not diminished in the least. I love how the market rallies and everyone pretends our problems are magically solved. Nothing more than sheep lining up to be shorn.

[HamdenRice]

58. Nationalization would have been one way. TARP was another.

I don't criticize him for that at all. In fact, inasmuch as TARP was an injection of equity capital, it was a nationalization. TARP was originally supposed to be a purchase of assets. Then Gordon Brown partially nationalized British banks and stabilized the system there.

Treasury copied Brown, and TARP became in effect nationalization without voting control. The stabilization I think proves Krugman was right.

[Yavin4]

60. Krugman Called for Full Nationalization

And he used Sweden as the model.

Don't backtrack and rationalize. He didn't cite Brown. He cited Sweden's full nationalization.

[HamdenRice]

61. Huh?

The point of nationalization was the change the banks' balance sheets. Both TARP and nationalization did that. No one is backtracking. I am accurately describing the accounting effects of nationalization (purchase of common stock) and TARP (purchase of preferred common stock) on the stabilization of the financial system.

Krugman was right even though Treasury didn't assume voting control.

[camera obscura]

82. Kind of like Sheila Bair still is which is why Geithner flipped out at her?

Yeah, trust me. I remember.

[Telly Savalas]

95. Remember Geithner's plan to hold auctions for toxic assets?

What happened to that?

It seems that everybody overestimated the level of the financial crisis. Talk of linking bailouts to restrictions on executive compensation seems to have magically made the scope of the bank's difficulties shrink.

[Doctor_J]

63. that's his take. Ravi Batra says another dip is coming

don't bet on anything yet

[mkultra]

70. if you look you can always find a cynic

[Doctor_J]

74. batra is not a cynic. He's a world-renowned economist and

populist who has a terrific track record of predicting the disasters of the Smirk era.

[mkultra]

87. except for the metldown

which was predicted by a few people including Nouriel Roubini but not Batra.

[Jennicut]

80. So we hit rock bottom. I think Krugman is correct in that the new normal

is not what the old normal will be with regards to the economy.
A second stimulus sounds nice but it will not pass congress...with these Blue Dogs? I really wonder.

[Douglas Carpenter]

83. I think that is most likely a fair and educated guess.

[zulchzulu]

88. I like Krugman, but man, he is all over the place on this...

If you look at the timeline of what Krugman thinks should be done over the last six months, it's been "Obama doesn't get it" to "we need to spend a lot more" to "the Stimulus will not work" to "we're heading toward another depression" and now this... "it might be over"...

Hey, it's great that he NOW thinks the disaster has been averted, but wow... imagine if Obama actually had listened to him when Krugman was saying the economy would never recover...

[Phx_Dem]

89. Today's column is even better because if this fabulous line . . .

All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution. Uh oh, is that Freeper heads I hear exploding???

Here's the full column.

http://www.nytimes.com/2009/08/10/opinion/10krugman.html?_r=2&ref=opinion

[tanyev]

93. Freeper heads exploding--are you kidding?

That line is near the end. They didn't even make it past the word 'averting' in the title.

[Phx_Dem]

94. Shit. I forgot they can't read. Damn it.

[PVnRT]

90. Nice to see the knee-jerkers out in force in this thread

[jeanmarc]

96. Job growth will be what Obama is graded on

To have job growth, you clearly have to decrease net job loss to zero.

So it is heartening to see the loss in jobs each month going down. But when 2010 rolls around, Obama will be judged on monthly net job gains. He can have a net loss for the time of his presidency as long as each month, jobs are growing in the positive direction.

And once job growth kicks in, I'd like to see some positive in real incomes. As I say to my Republican friends, I will grade this President consistently with how I graded the last pResident. Obama inherited a horrible mess. Unfortunately, the grade comes every two years, not every four.

I hope by the Spring of next year, the economy is robust again, producing jobs and I really hope the real wages go up.