Leading World economist predicts that the UK will have a “lost decade”

Not too many people know this but that vast industrial giant of a country, Japan suffered a lost decade. It was during the nineteen nineties, and what it means that during that time Japan’s economy stood still. Neither growing nor contracting. Looking at the picture a little closer, will teach us that for the first two years of the “lost decade” give or take a month or two either way the company was tottering on the brink of total financial collapse and spent the rest of the ten years slowly pulling itself out of it.

Now one of the World’s most respected economists and Nobel Prize winner has announced that the UK (under the shadow of the US economy) is in more or less the same situation. This means that we are now at the stage where disaster has been averted, thanks to timely and decisive intervention by the Treasury departments of both nations. Yet the financial guru who has made these statements predicts that what has been laid out till now fades in comparison to the breathtakingly huge sums of money that will need to be paid out over the next eight years or so till the Western economies get back on their feet.

The economist, who deserves to catch our attention, is Professor Paul Krugman, who throws a wet blanket on the “green shoots” theory by stating that the recovery would be “so slow it would feel like we are in a constant recession”. He also insists that the US $800 billion stimulus package was too little and not spread out over sufficient time to make a significant impression on the huge US economy.

Professor Krugman went on to explain that the US government, going as far back as Reagan’s in the 1980’s with too little regulation on banks and exacerbated by the lack of a social safety net.

The end of the recession when it comes, according to Professor Krugman “doesn’t mean the same thing as it did in the old days”. He predicts that unemployment could remain higher than in previous recoveries, and that a , normal rate of Gross Domestic Production in the West could sit at 2% or even lower compared to 3.1% average rate which was common way back in the good old 1990s.

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Tags: Credit Crunch, Economics, Economy, Financial News, Paul Krugman, Recession, UK Recession