New York Times (NYSE: NYT) columnist Paul Krugman, who has previously expressed concern about governments withdrawing fiscal and/or monetary stimulus too quickly, resulting in a stall of the just-started recovery, Monday provided more reason to stay-the-course. Krugman, a Nobel Prize winner, did say in Helsinki Monday that the global recession has probably bottomed but the recovery will be "slow and painful," Bloomberg News reported.
Given the depth and length of the current global recession, a conclusion that the downturn has bottomed by someone very close to the data would be viewed as a positive. However, Krugman also said, "The end of the world appears to have been postponed" and that "the truly extraordinary thing" has been "the collapse of world trade," Bloomberg News reported. He added: "How can we have an export-led recovery unless we find another planet to export to?"
Economic Analysis: International trade, which walked hand-in-hand with increased commercial linkages between countries and markets -- also called interdependence -- has been exhibiting its downside since the global recession started. Export-dependent economies, especially emerging economies, will have trouble growing if consumer demand for goods does not re-appear.
Historically, that end-market was the United States. But the sustained pull-back by U.S. consumers has most likely eliminated the U.S. as the primary growth engine for the next global economic expansion. Further, China's consumption, in Krugman's view (he's not alone), will not be able to fill the gap, leaving a largely export-dependent global economy short tens of millions of consumers. As Krugman acknowledges, there are no quick and easy solutions to the problem, which is, arguably, the second biggest problem facing the global economy after access to credit.
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Reader Comments (Page 1 of 1)
9-22-2009 @ 5:57AM
oprica007 said...
Mercedes SLR raced with Ferrari. The two children went to the hospital.
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The worst crash ever. 2009
9-22-2009 @ 8:52AM
John W. Taylor said...
A $1.8 trillion deficit. Deficits of trillions as far as the eye can see. And the government encouraging everyone and every business to take on more debt, through 0% federal funds rate, isn't significant inflation just a matter of time?
9-22-2009 @ 9:03AM
cabo79 said...
Krugman you don't get it. For the past 30 years the cry by our government has been " keep the wage rate down" The growth in consumption in the US was caused by a increase in population in the US, NFTA sent millions of Mexicans and others from South America to the US so they could survive. That and the end of any standards used for extending credit kept this consumption going. It's OVER NOW.