Paul Krugman on the Problem of Bankruptcies

Paul Krugman calls the experience 'expensive suffering.'
  • Transcript


Question: What does the rash of bankruptcies mean for the economy?

Paul Krugman: Well it means a lot.  First directly it’s a lot of suffering.  It’s a lot of losses.  And bankruptcy . . . Foreclosures are expensive for everybody.  They’re a very costly way of resolving the . . .  The lender loses money.  The borrower has his or her life disrupted.  It’s a very, very bad thing.  They will . . .  Just a question we all have is how much is this gonna slow the economy?  How much . . .  You know are we talking a recession?  And the answer, which I can say with great confidence, is nobody knows.  It’s very difficult to pin these things down.  It certainly slows the economy, and we will be seeing it again.  I think the economy is gonna be sluggish for a long time to come because of the housing.  Whether it’s enough to tip it into . . . into something that will meet the official definition of a recession, I think the odds are less than even.  But it’s still pretty . . . it’s gonna be nasty.  It’s gonna feel . . . it’s gonna feel . . .  It already to most people feels like a . . . like a bad economy.