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November 15, 2011 at 09:25 AM
Has America entered an era of persistent economic weakness like the two decades of stagnation Japan has faced since the collapse of its bubble economy in 1991? That is the question that two eminent Keynesian economists, Nobel Prize laureate and New York Times columnist Paul Krugman (left)and former Clinton administration Treasury Secretary Lawrence Summers debated Monday night in Toronto.
Krugman, paired with Canadian economist David Rosenberg of Gluskin Sheff, affirmed the motion that America won’t escape a Japan-style lost decade while Summers, paired with the founder of the Eurasia Group consultancy Ian Bremmer (right), denied the motion.
Krugman, a long-time bear said, “It’s now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery.” The liberal economist has long argued that the politically acceptable level of stimulus promoted by the Obama administration has been insufficient to jump-start the economy. He pointed out that an economy could remain stalled for a very long time, noting that Japan is in year 19 of its “lost decade.”
Krugman’s debate partner Rosenberg, an uberbear who does not share Krugman’s Keynesian outlook despite agreeing on his conclusion, recently predicted the S&P 500 may drop back to 600. He painted a picture of a U.S. economy that has accomplished little despite unprecedented stimulus, and suggested the economy will crater when taken off steroids. The Distressed Volatility blog quotes Rosenberg at length:
.JPG "Larry Summers")
While a majority of the audience favored Krugman’s and Rosenberg’s view both before and after the debate, it was Summers (left) and Bremmer who shifted the opinion meter the most, bringing support for their position from 26% to 45% support, thus achieving a technical debate victory.