‘I think that there is a quite good chance that we will have a recession late this year [or] next year.’
Nobel laureate Paul Krugman says he sees a good chance of a recession hitting the U.S. within a year.
Speaking at a government summit in Dubai, the economist and highly read New York Times columnist said the likelihood of an economic slowdown hitting the U.S. was high due to sluggish growth already buffeting China and Europe. According to a CNBC, Krugman said that “there was a good chance that the U.S. will have a recession late this year” or by 2020.
Krugman said the fact that policy makers, including the Federal Reserve and the European Central Bank, don’t have room to respond to a downturn also could be a factor that worsens a downturn that hits Europe and Asia and bleeds over into the U.S.
In a separate interview with Bloomberg at the same summit in Dubai, Krugman said he saw even odds of a recession.
“There seems to be an accumulation of smaller problems and the underlying backdrop is that we have no good policy response. [The] Fed can’t cut rates very much. Fiscal policy…there is in fact fiscal space, if we were prepared to use it, but it’s hard to see that this current leadership is going to respond in any nimble way. So, yeah, I’d say there’s better than even odds that we will have a recession,” Krugman told Bloomberg on Sunday.
“The euro area is clearly experiencing a slowdown pretty close to recessionary levels already and has no recourse. Draghi can’t cut rates because they’re negative already …so I think Europe is a danger spot that is potentially as big as China,” said the economist, referring to the ECB’s President Mario Draghi and that central bank’s stimulus measures rolled out to address the 2007-’09 financial crisis.
To be sure, Krugman, who hasn’t been shy about forecasting economic recessions that failed to materialize, acknowledges that his track record (and everybody else’s) in predicting slowdowns is far from infallible.
“By the way, my track record for this is bad — as is everybody’s. No one is good at calling these turning points,” Krugman said, according to CNBC.
A looming recession was chief among fears that took hold of U.S. markets late last year, culminating in Christmas Eve losses for the Dow Jones Industrial Average
the S&P 500 index
and the Nasdaq Composite Index
that were the worst such declines on the trading session prior to Christmas on record.
However, those festering worries gave way to one of the best January returns of the past three decades, as many market participants judged that investors had been too pessimistic.
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