Krugman on Hardball... video and transcript

[RedEarth]

MATTHEWS: Welcome back to HARDBALL. Joining me now, "New York Times" Pulitzer-oh, Nobel Prize-winning columnist Paul Krugman, whose new book is called "The Return of Depression Economics: The Crisis of 2008." Just tell me, sir-congratulations, by the way, on winning a Nobel-are we going into a Great Depression again? Is it that bad?

PAUL KRUGMAN, "NEW YORK TIMES": I don't think so, but you know, I'm not 100 percent sure of that. It's certainly going to be the worst thing since the Great Depression. This is going to be-this is really bad. It may not be-you know, I don't know if we're going to have guys selling apples on the streets, but it's going to be really very bad, and much worse if we don't have an effective response.

MATTHEWS: How long's this deflation going to work, where-are we going to reach the point, like they did in the Great Depression, where it was more expensive to make something than you could sell it for, you had the prices were so low, they didn't even reach the cost of production, and that's why you did throw things on the ground?

KRUGMAN: Well, that's happening already in some-you know, some resource sectors. It's-there's a lot of manufacturing where they don't cut the prices so much but where stuff is piling up. You know, we've got luxury cars landing at the docks in Los Angeles and then just sitting there because no one could buy it. So look, this is a lot like-this is functionally a lot like the Great Depression. You know, the thing about the Depression was they couldn't cut interest rates because they were already at zero. And guess what? You know, three-month Treasury bills are 2 one hundreds of 1 percent interest rate right now. We're basically in those kind of conditions.

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