Irrational markets: V-shaped edition

June 8, 2009 in Economics,Finance

The market shot up late this afternoon because Paul Krugman stated:

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” he said in a lecture today at the London School of Economics. “Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

In an exceptional display of reverse-causality, Krugman clarified today's remarks with ones he made last Friday:

Nobel Prize-winning economist Paul Krugman said the world’s economy is showing “not a hint” of a “V-shaped” recovery marked by a swift decline and revival.

The economy is “stabilizing, not recovering,” Krugman, an economics professor at Princeton University in New Jersey, said today at a conference in Dublin. “Things are getting worse more slowly.”

“We have made the transition from sheer panic to chronic anxiety,” Krugman said, adding he’s has a “hard time” seeing what might drive a “full” economic recovery.

Indeed, anyone following Krugman for the last year is certainly aware that he doesn't see the end of the recession as anything more than a semantic difference. An L-shaped recovery is hardly a "recovery" at all. But don't tell the day-traders.

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