Nobel Economist: The Worst is Over

(AP)  Aggressive stimulus spending by governments helped the world avoid a second Great Depression but full economic recovery will take two years or more, Nobel Prize-winning economist Paul Krugman said Monday.

Krugman said the worst of the global crisis was over with economic and exports growth showing signs of stabilization. Still, recovery was likely to be "disappointing" as government spending wasn't sustainable in the long-run and unemployment rate still lagging behind, he told a two-day world capital markets conference here.

There isn't likely to be any "Phoenix-like" recovery such as in the 1997-98 Asian financial crisis, where the economies expanded dramatically, led by a sharp rebound in exports, he said.

"We have managed to avoid a second Great Depression ... but full recovery is at least two years and probably more," Krugman said.

Asia is likely to see a faster rebound, than the U.S. and Europe, partly driven by the recovery in manufacturing exports, he said.

In the clearest sign yet that the recession may be ending, the U.S. Labor Department last Friday showed the jobless rate in the world's largest economy dipped for the first time in 15 months while workers' hours and pay edged upward.

It said a net total of 247,000 jobs were lost last month, the fewest in a year and a drastic improvement from the 443,000 that vanished in June. Still, the job market remains shaky. A quarter-million lost jobs are a far cry from the employment growth needed to put the national economy on solid footing.

President Barack Obama has urged Americans to be patient and give time for his $787 billion stimulus package of tax cuts and increased government spending to take hold. Most of the money will flow in 2010.

Krugman said there was still room for the U.S. government to increase spending to boost growth, despite concerns over its swollen budget deficit.

Krugman, who teaches at Princeton University, won the Nobel Prize in Economic Sciences last year for his analysis of how economies of scale can affect international trade patterns. He also writes columns for The New York Times.

He said there was a need to restructure the global financial system and impose tighter regulations to avoid a repeat of the economic crisis, but expressed concern that the momentum for reforms appeared to be easing.

"We do not have the political will to do that just yet ... I suspect clever people can still make a lot of money from the financial system in the next few years," he warned.

Earlier, Malaysian Prime Minister Najib Razak urged regulators worldwide to jointly create a compatible, sustainable and effective surveillance system to prevent future market crashes. These include keeping a close eye on risk-taking activities and having a common procedure for intervention if there are signs of irrational excess, he said.

"Over-reliance on self-regulation is a mistake," he said. "Global regulators should err on the side of investor protection and financial stability rather than rely on a 'buyer beware' regulatory regime."

Singapore's Finance Minister Tharman Shanmugaratnam and Hong Kong Secretary for Financial Services and the Treasury K.C. Chan warned against being too hasty, saying greater regulation of financial institutions mustn't be at the expense of stifling innovation and growth.

[mejordelahistoria]

who should we listen to, a nobel prize winner in economics? or a right wing ignorant nut product of the republican party's idea of education known as "no child left behind"?
We are recovering because we are reducing the number of high school dropouts we have in iraq saving us about 80 billion dollars every few months. Hopefully we can end the operation in afghanistan soon enough also so we can stop the bleeding of our economy completely and start working on recovering our constitutional values and freedoms taken away by the ashcroft, bush and the other traitors who supported the taliban in the 80's. In a few years we will start coming full circle and enjoy the times we had during clinton's presidency.

[Lawyers-Guns-n-Money]

by specialty8 August 10, 2009 5:09 PM EDT
You don't happen to live in the Chicago ghettos do you? You know Obama, Blago, Rev Wright, Renzo...
=============================================================

Renzo -- Stimpoli's Italian roomate.

[Dr Newel]

There is the old saying of what to produce, whom to produce it for and how to produce it: Guns or Butter? The U.S. can only produce X amount of things and if we spend too much effort, time, and money on Warfare, then the other things go lacking. It may be that all of the other stimulus money went down a rat hole, but the Cash for Clunkers program was the only thing that worked, and it was very cheap. The banks getting excessive fees for overdafts, and other excessive fees are counterproductive. Imagine college students on a 3 dollar a day budget getting charged 35 dollars overdraft for a $1.50 cup of coffee at the end of the month. Bank executives have lived the Life Styles of the Rich and Famous while on Government welfare amounting to billions. These bank executives should all be forced to serve soup in homeless shelters for one day a month equal to the California Furloughs. Bank executives in San Francisco live in $300,000.00 a month apartments downtown - sick.

[devilfly1]

Very Interesting story.

There are 300 economists in the world.

Why is not there a a single solution?

Check out the book called "Eco-Spasm". I considered this a good information.

Yes, there will be a solution. It might take forever.

[devilfly1]

Very Interesting!

Did you know that there are only 300 economists in the world?, Why is not a single solution to the Recession, which we are currently experiencing it?

Check the Eco-Spasm book? It is a good book with a lot of informations and triggers.

Be prepared for the best and the worst. TSK!

[zonkzilla]

"I am so sick of watching him and his arrogance"

We get your point. You are sick of that arrogant "negro" thinking he is as good as a white man and not some shoe shine boy. We get it already, you hate black people.

[zonkzilla]

Please Nissan, can you start selling your new affordable electric car sooner than next year?
PLEASE?
I am sick of the gas price manipulators using "good news" to jack up prices and rip us off.
As soon as I can get an affordable electric car my gasoline car is heading for the crusher. I have had enough.

[zonkzilla]

Oh great, now because of that guy's statement the Wall Street manipulators and billionaires will raise gasoline prices to $3.00 in a week. It has already gone up .25 a gallon in a few days because unemployment has slowed down.
Thanks a lot.
When will those people learn to keep their mouth's shut?

[jakedog030]

Krugman is a perfect example of a liberal elite. He has never run a business, never created one single job and has never made anyone wealthy other than himself; yet some liberal pinhead at the Nobel Institute gives him the Nobel Prize because he's a socialist-leaning liberal. He really should've won the booby prize, not the Nobel Prize.

[notsouthern]

YOur savior of thieves GW Bush did not create one US job in his first term as the worst president in US history. Then self-centered southern fools like you voted for him again.

[presjfk]

Maybe there is a recovery in sight, maybe not. I certainly want to believe it.

But there is no doubt that we as a nation have done a great many stupid things that no other nation has ever done!

- Sending our factories and jobs overseas.
- Allowing massive trade deficits, not in the interest of our country but in the interest of corporations to send trillions overseas, much of it to China.
- Being energy dependent on our worst enemies and sending trillions overseas.
- Allowing foreign nations and corporations to lobby our government and outright buy our politicians.
- Allow millions of illegals to work, go to school, buy homes, get mortgages, get licenses and more all without the rights as citizens to operate and live in our country.
- Spend $100 bill more each year on the military than ALL OTHER NATIONS COMBINED!

Our economy may recover according to economic indicators but until these problems are solved, we will be a declining economic power, offering less for future generations than those that came before.

We have squandered our wealth and promise for a better life.