Paul Krugman calls the experience ‘expensive suffering.’
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.