5th
Krugman On Why This Time It Is Different
I am afraid that Paul Krugman is right when he says that, although a few bullish news are to be expected, the economy is still fundamentally ill:
During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.
What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.
Can exports come to the rescue? For a while, a falling U.S. trade deficit helped cushion the economic slump. But the deficit is widening again, in part because China and other surplus countries are refusing to let their currencies adjust.
I also believe that the United States have the luxury to afford to temporarily run even higher fiscal deficits to keep propelling a sick economy. Something that Japan is probably not able to afford any longer …
