Noted bitcoin basher and Nobel Prize-winning economist Paul Krugman has warned that the global economy could be headed for a recession this year, according to CNBC. Per Krugman, the recession could occur towards the end of this year or in 2020:
I think that there is a quite good chance that we will have a recession late this year (or) next year.
According to the economist who won the 2008 Nobel Prize in Economic Sciences for his work on among other subjects trade theory, the next economic downturn could be prompted by a variety of causes.
Among the areas of concern for Krugman include the U.S. tax cuts which were passed by Congress in late 2017. The economist who teaches at Princeton University has questioned the effectiveness of the tax cuts. Other risk factors, according to Krugman, includes the bubble in the tech sector, which he believes may be deflating.
In Krugman’s view, the European Union could be the first to feel the impact of a global downturn:
The place that looks really close to recession right now is the euro area.
This comes on the back of the European Commission (EC) revising economic growth forecasts downwards this year and the next. While euro zone recorded 1.9% GDP growth last year, the EC expects that figure to fall to 1.3%. In 2020 economic growth will rise slightly to 1.6%.
This is in contrast to projections released by the EC last year. Then the EC projected growth in 2019 will be 1.9%. In 2020 the EC had forecast a growth rate of 1.7%.
Of particular concern to Krugman is the fact that policymakers are usually helpless in the face of economic downturns:
The main concern has always been that we don’t have an effective response if stuff slows down.
If a global economic recession does indeed occur, it would becoming a little over a decade since bitcoin came into being. As early as 2014 Krugman was already bashing bitcoin. Among other terms Krugman has called bitcoin ‘The Long Cryptocon’ and evil.
While bitcoin has now entered everyday vocabulary, the purpose for which it was intended for – as a deflationary currency that is decentralized – is yet to be tested in the environment which inspired it – a global recession.
Besides Krugman, other economists who have also expressed the state of the global economy is Nouriel Roubini. Incidentally, Roubini is another noted bitcoin basher. In a Project Syndicate column last week, Roubini warned that though global recession risks are low, economic deceleration is certain. And just like with Krugman, Roubini also sees an enhanced risk of economic deceleration in the euro zone:
…the eurozone is slowing down, and it remains to be seen whether it is heading toward lower potential growth or something worse. The outcome will be determined both by national-level variables – such as political developments in France, Italy, and Germany – and broader regional and global factors.
Last modified: March 4, 2021 2:53 PM