The global economic free fall may be over, says the Nobel Prize winner, but that's no reason for cheer
Even when Paul Krugman is saying relatively encouraging things about the economy, he still leaves some room for deep gloom. Speaking at a seminar in Ho Chi Minh City today, reports Bloomberg, Krugman said he thinks the “free fall” of the global economy may have come to an end.
The American economy may expand “slightly” in the second half, he said, citing a slowdown in the pace at which jobs are being lost.
Just about all of the economic indicators out there are suggesting that the free-fall has come to an end, that we’ve stabilized … Probably the worst in terms of shocks to the system is over.
But … there’s a big but. Stabilization of the economy means that nervous investors worldwide will no longer be seeking the “safe haven” of U.S. dollars. Up until now, even though the U.S. is running huge deficits and the Fed is printing money like crazy, implying that inflation will eventually take hold, the value of the dollar has remained strong simply because it’s the best of a bunch of bad options. But as tension eases, the appetite for the dollar will likely decline sharply, said Krugman.
This suggests a very nasty paradox. By going all out with both fiscal stimulus and expansive monetary policy, the U.S. may have stopped the bleeding. But to pay for these expensive treatments, the U.S. government depends on investors continuing to snap up U.S. Treasury bonds and bills — which become progressively less attractive as global panic subsides.
So success breeds failure. But then again, a weakening dollar would presumably make U.S. exports more attractive globally, which could provide a much-needed stimulus to the American manufacturing sector. Which could cut down the trade deficit and increase domestic tax revenue that might help reduce the ongoing budget deficits. And around and around we go.
More Related Stories
- Colorado judge rules Abercrombie parent company violates Disabilities Act
- When America became a third-world country
- Inhofe and Coburn: Red state hypocrites
- It's Whitewater all over again
- Teen activist to meet with Abercrombie CEO
- Anyone regret slashing National Weather Service budget now?
- Oklahoma senator: Tornado aid "totally different" from Sandy aid
- Aloof, shifty Obama: Nixon times ten thousand!
- Obama: Moore "needs to get everything it needs right away"
- California Tea Party group files first IRS lawsuit
- Still no polling backlash for Obama
- Oklahoma senator wants to offset tornado aid with other cuts
- Former IRS commissioner to testify on Capitol Hill
- Limbaugh: No one willing to impeach the first black president
- Top White House aides knew about IRS probe but didn't tell Obama
- Gohmert: IRS would've "probably shot the Boston Tea Party participants"
- Oregon senator proposes appeal to Monsanto Protection Act
- Supreme Court to rule on prayer at government meetings
- Beltway scandal machine breaks, knows nothing about America
- Top GOP official: "Sometimes our party does not value" women "as much"
- Colorado Dems fight back against GOP's Voter ID measures
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11