Rapid Recovery ‘Extremely Unlikely’, Paul Krugman

Nobel-prize winning economist Paul Krugman said in remarks published by Bloomberg news service on Tuesday – that “global economic prospects don’t justify the two-month rally that has restored $8.9 trillion to stock markets around the world.”

From Bloomberg: Speculation government spending packages and interest-rate cuts worldwide will reinvigorate the global economy has helped the MSCI World Index rally 37 percent since falling to its lowest since 1995 on March 9. The U.S. Standard & Poor’s 500 Index surged 34 percent in that time.

“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Krugman, 56, said at a forum in Shanghai today. “The market seems to be looking as if this is going to be an average recession, but it’s not.”

“Some of the measures that have been taken to deal with the crisis seem to be predicated on the belief that this is going to be a short, short recession,” Krugman said today. “Everything says that’s wrong, that this is going to be a sustained period of weakness.”

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