There’s nothing in the street
Looks any different to me
And the slogans are replaced, by-the-bye
And the parting on the left
Is now the parting on the right
And the beards have all grown longer overnightI’ll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around me
Pick up my guitar and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again
On May 25th, at a speech in Hong Kong, Paul Krugman said: “I will not be surprised to see world trade stabilize, world industrial production stabilize and start to grow two months from now. I would not be surprised to see flat to positive GDP growth in the United States, and MAYBE even in Europe, in the second half of the year.” Although Krugman also questioned: “In some sense we may be past the worst but there is a big difference between stabilizing and actually making up the lost ground. We have averted utter catastrophe, but how do we get real recovery?” The markets ignored the BUT (economists do tend to say BUT a lot) and the Dow rallied 200 points the nextday.
In fact, the Dow rallied 200 points on Monday May, 18th as well asTuesday, May 26th (Monday was a holiday) and Monday June 1st,with those 3″Monday’s” accounting for600 of the 500 points the Dow has gained since Krugman’s first speech. Oil is up over 10% on that “rosy” outlook as well, starting at $60 on the 26th and flying up (with the help of GS) since, all on hopes that the economy will be “back to normal” next quarter. Of course that’s not what Krugman said at all but so what?
Yesterday, with the Dow down 150 points from Friday afternoon’s 8,800 level, Krugman made a speech in London, where he said: “I would not be surprised if the official end of theUS recession is dated, in retrospect, some time this summer.” He said in retrospect becausethe context was thathe expectsthe kind of recovery you won’t know you are having until 6 months or so later,when you can look back and say -“Oh, that’s where we bottomed,” as opposed to a V recovery where the bottom is ovbious.
He also said: “Almost surely unemployment will keep rising for a long time and there’s a lot of reason to think that the world economy is going to stay depressed for an extended…
