Newsweek's Krugman hit piece as a sign we haven't hit bottom
Interesting perspective from Felix Salmon:
Evan Thomas has a profile of Paul Krugman on the cover of Newsweek. The 2,825-word article has six on-the-record quotes about Krugman; none of them -- not even the one from his mother -- are particularly flattering. No one is quoted saying a single nice thing about Krugman's economics or his opinions.
I suspect that the final product is the result of overcompensating for the fact that Thomas and Meacham [are] fearful that Krugman might be right, and have therefore come up with a list of reasons why it might be reasonable to ignore him.
And this, at heart, is why I think we haven't yet seen the worst of this crisis, neither in terms of the financial markets nor of the broader economy. There's still a sense of denial in the air -- a feeling that if you're going to devote an entire cover story to someone like Krugman, then the story should bend over backwards to showcase people saying that he's wrong, while it need make no such effort to quote anybody saying that he's right.
Or, to put it another way, the question posed by the article isn't whether Krugman is right or wrong -- it's whether he's worth listening to or not. And the answer posed by the article is "we fear he might be, but we hope he isn't". The problem -- which the article doesn't mention -- is that the history of this economic crisis to date is a history of fear being right and hope being wrong.
Yep. We do indeed live in the Age of the Anti-Cassandra.
NOTE On hitting bottom: This is not AA talk, but apparently a well-known idea in financial circles:
Having worked in the financial markets in one capacity or another for nearly three decades, I've observed that market declines typically don't hit bottom until sometime after the phrase “free fall” begins emerging with regularity. We haven't seen that yet.
[M]arket bottoms are created because investors stop looking for a bottom, and extrapolate ongoing bad news. If you remember the lows of 1982, or 1990-1991, or 2002, you'll recall that in each instance, the question among investors wasn't whether the economy would recover in one quarter versus two quarters. The question was how the economy could recover at any point in the foreseeable future. Investors give up hope at bottoms. We don't see that here.
So, we may safely discount the "glimmers". There's no bottom until you hit bottom. The signs of that aren't there.