Today's Krugman Speech - Good Times are Over.

In addition to Rob's remarks, Paul Krugman gave the keynote at today's New America conference. I don't know if his speech is being released, but i took some notes here. His view is that the biggest problems are housing and the trade deficit, and that he sides with the pessimists in the national debate. He was especially interesting on how to respond. (I stress these are notes from his remarks, not a transcript. So please don't treat them as verbatim.)

The thing to be worried about is the difficulty of a policy response. We normally count on the Fed to respond. (Bernanke, on the whole, has had his judgment on rates vindicated.) But if this turns nasty, what will the Fed do? They will cut rates. And will this help? Where is the traction on the real economy? The problem is that rate cuts stimulate the economy mostly through the housing and construction market. In truth, business investment is not sensitive to the Fed and consumers don’t respond. Housing is where the rubber meets the road. So that is a worry.

The gist of his remarks, and others at the conference, were not encouraging. There seemed to be consensus that growth would decline, while unemployment would rise by roughly a percentage point, over the coming year. So even if there isn't a recession it, in Krugman's words, will feel like there is one. And, as we've been saying for a while here, this will become the first expansion since the Great Depression without a rise in wages or incomes. Indeed, it seems the economic good times are over - before they really began.