“A second stimulus is becoming clearly urgent. They need a very, very strong stimulus,” said Krugman during a visit to Beijing. He also said the US risks a Japan-style lost decade of growth if it does not take action to stimulate its economy and clean up banking system.
“We’re doing half-measures that help the economy limp along without fully recovering, and we’re having measures that help the banks survive,” he said. Krugman said he expected little or no employment growth in ’09 or next in the US, where the jobless rate in April hit a 25-year high of 8.9 per cent.
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