The Unconvinced Trio

On May 5 (see It's a V...Oops) I wrote about some very encouraging signs of a recovering US economy. Not everyone agrees, however: in particular, some noted economists--who often hold a rather pessimistic view of the US economy these days.

Paul Krugman, from Princeton University, won the 2008 Nobel Prize for economics. He has the ear of President Obama. He thinks a V-shaped recession is extremely unlikely. The market seems to be looking as if this is going to be an average recession, but it’s not.


Nouriel Roubini, known as the Doctor of Doom, from New York University, is calling for a more cautious outlook on growth. Roubini says analyst comments expecting the U.S. economy to rebound in the third and fourth quarter are too optimistic.


Nassim Nicholas Taleb, the author of Black Swan, says the current global crisis is vastly worse than the 1930s.


Krugman goes on to say, Some of the measures that have been taken to deal with the crisis seem to be predicated on the belief that this is going to be a short, short recession. Everything says that’s wrong, that this is going to be a sustained period of weakness.

This noteworthy trio's opinions stand in stark contrast to Treasury Secretary Timothy Geithner who says, The financial system is starting to heal. These are all welcome signs, but the process of financial recovery and repair is going to take time.


While we are experiencing pain now, I observe that the problems of the Great Depression were several magnitudes greater. The facts are in sharp contrast to Nassim Taleb's opinion.


The Philadelphia Federal Reserve Survey of Professional Forecasters projects the average unemployment rate for 2009 to be 8.4% and the average forecast for 2010 is 8.8%.

It is probable that the jobless rate in this recession won't even reach the minimum monthly rate of the 1930s, and won't come anywhere close to the 17.3% average jobless rate during the Great Depression.

Just this week Krugman appears to have softened his outlook, saying at a conference in South Korea, I think it's quite possible that industrial production in the United States and perhaps in the world as a whole will bottom out sometime in the next few months, that GDP growth in the United States will be positive in the second half of the year and maybe a little bit later than that in Europe.