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Reply #84: "Krugman Sees 30-40% Chance of U.S. Recession in 2010 (Update1)" [View All]

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Nikki Stone1 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-06-10 08:23 PM
Response to Reply #70
84. "Krugman Sees 30-40% Chance of U.S. Recession in 2010 (Update1)"

an. 4 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman said he sees about a one-third chance the U.S. economy will slide into a recession during the second half of the year as fiscal and monetary stimulus fade.

It is not a low probability event, 30 to 40 percent chance, Krugman, an economics professor at Princeton University, said today in an interview in Atlanta, where he was attending an economics conference. The chance that we will have growth slowing enough that unemployment ticks up again I would say is better than even.

Krugman, 56, said the Federal Reserves plan to end purchases of $1.25 trillion of mortgage-backed securities and about $175 billion of federal agency debt in March could spur an increase in mortgage rates and lead to declines in home sales and prices.

Fed Chairman Ben S. Bernanke and his fellow policy makers, seeking to revive credit markets, cut the benchmark interest rate almost to zero in December 2008 while switching to asset purchases and credit programs as the main policy tools. The U.S. central bank has expanded its balance sheet to $2.24 trillion from $858 billion at the start of 2007.

Probably mortgage rates go up some, Krugman said. Housing sales may falter, he added.

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