Care for a bitter draught of economic realism to start off your summer weekend?
In his column in today’s New York Times, Paul Krugman predicts that the housing market won’t begin to emerge from its current slump until at least 2011, and that’s because that market will keep slumping for a while. Waiting for a bubble to deflate is the opposite of popping a water balloon — it takes a while.
And the overall economy? That won’t begin its repair until 2010 or later:
It’s true that some prognosticators still expect a “V-shaped” recovery in which the economy springs back rapidly from its slump. On this view, any day now it will be morning in America.
But if the experience of the last 20 years is any guide, the prospect for the economy isn’t V-shaped, it’s L-ish: rather than springing back, we’ll have a prolonged period of flat or at best slowly improving performance.
There is some good news buried in Mr. Krugman’s column, at least for Obamamaniacs. Mr. Krugman thinks that the crappy economy makes the Illinois Senator a virtual shoo-in for ’08, absent a disastrous scandal.
But not necessarily for 2012:
But what the economy gives, it can also take away. If the current slump follows the typical modern pattern, the economy will stay depressed well into 2010, if not beyond — plenty of time for the public to start blaming the new incumbent, and punish him in the midterm elections.
Have a cheery weekend!