Krugman Sees 30-40% Change of US Recession in 2010

Nobel winning economist Paul Krugman believes there is a 30-40% change of a double-dip recession in 2010.

All the big economists are in Atlanta at the American Economic Association. Bernanke made a speech today defending the low interest rate policies of the Fed. Krugman is not the only Nobel Laureate who believes there is a growing chance of a second recession. Economists Joseph Sitglitz and Martin Feldstein also believe that fading stimulus threatens to tip the US back into recession.

He predicts that the impact of the fading stimulus will be felt in the second half of the year and that growth may go negative by the end of the year. In addition, he believes that Asia may also face recession.

“Historically, financial crises are very, very prolonged,” Krugman said. While the U.S. banking system has “stabilized,” it hasn’t returned to normal, he said.

“Small business is still very constrained in its borrowing,” he said. “That is not a good thing. We do not have a fully healthy, functional financial system.”