Tags: Krugman | economy | Fed | half empty

Krugman: Economy 'Half Full, Half Empty'

By    |   Monday, 21 July 2014 08:53 AM

For a long time after the 2007-09 financial crisis, Nobel laureate economist Paul Krugman had a bleak view of the economy, but now his outlook has changed — a bit.

"Things are getting better, finally. It's starting to look like a real recovery," he told Fareed Zakaria on CNN.

"But it's not a boom. And this is after many, many years of terrible performance. . . . I would say it [the economy] is half full, half empty. More half empty than half full, because we should be doing much better than this."

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The economy contracted 2.9 percent in the first quarter, but many economists expect GDP to expand at an annual pace of more than 3 percent for the rest of the year.

Krugman voiced support for the Federal Reserve's massive easing program. "Certainly keeping rates low, there's no rational reason not to keep them low," he noted.

"Business doesn't see a lot of investment opportunities, people aren't ready to buy houses in large numbers yet. So you have to have a cheap money environment. And, thankfully, the Fed has been doing its job."

The central bank has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.

While many economists don't think the Fed will start raising rates until at least the second quarter of next year, Herb Morgan, CEO of money management firm Efficient Market Advisors, says it may have to act sooner.

"The lowest interest-rate environment ever seen has encouraged risk-taking that could lead to the formation of dangerous bubbles," he wrote in an article for Forbes. "The massive increase in the monetary base sows the seeds for inflation."

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Economy
For a long time after the 2007-09 financial crisis, Nobel laureate economist Paul Krugman had a bleak view of the economy, but now his outlook has changed — a bit.
Krugman, economy, Fed, half empty
306
2014-53-21
Monday, 21 July 2014 08:53 AM
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