Paul Krugman has an excellent article in the NY Times op-ed section concerning his pessismism of an economic recovery. He notes the rising unemployment rate, indicated by the rise in unemployment insurance collection, and a decrease in payrolls. He also notes certain economic shocks currently underway, such as the SARS virus, which could cause productivity to contract even more. He also notes - correctly, in my opinion - the dubious logic that leads people to believe that the economy is waiting to bounce back due to the war in Iraq. He doubts that the economy is waiting to recover upon hearing of success in Iraq.
"Optimists now place their faith in the supposed salutary effects of victory in Iraq. The theory is that businesses have been postponing investments until uncertainty over the war is resolved, and that once that happens there will be a great surge of pent-up demand. I'm skeptical: I think the main barriers to an investment revival are excess capacity, corporate debt and fear of accounting scandals. (The revelations about HealthSouth suggest that there is still plenty of undiscovered corporate malfeasance.) I also wonder whether victory in Iraq will mark the end of uncertainty, or the beginning of even more uncertainty. Are we on the road to Damascus (or Tehran, or Yongbyon)?"Posted by Admin at April 4, 2003 08:45 AM