The government and Federal Reserve must ramp up their stimulus to prevent the economy from falling back into recession, says Nobel laureate economist Paul Krugman.
“We are looking at what could be a very long siege here,” the Princeton University professor told Bloomberg.
“We really are at a stage where we should have a kitchen-sink strategy. We should be throwing everything we can get at this.”
While Krugman is calling for more stimulus, some European nations have begun to reverse theirs in an effort to trim exploding debt burdens.
Some economists believe the United States should adopt fiscal austerity itself to curb the budget deficit — estimated at $1.6 trillion for this year.
But Krugman begs to differ.
“The most effective thing you can do, in terms of actual bang for the buck, is having the federal government go out and hire people,” he said.
“We are deep in the hole here, and you need to be unconventional to get out of it.”
Krugman recently argued in a New York Times column that the U.S. already has entered the third depression in its history.
While he doesn’t believe this depression will be as damaging as that of the 1930s, “the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense,” Krugman wrote.
He told Bloomberg that we’re in for “a really prolonged bad period.”
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