Krugman sees slow, painful global recovery on trade woes

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.