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Archive for December 24th, 2008

Paul Krugman, who won the Nobel Prize in economics this year, speaks about the state of our economy at the National Press Club.

Here’s the best part of his hour long speech:

Start around the 4 minute mark, and follow through until the end – this is the part of his speech where he breaks away from his notes and speaks about the practicality of a bailout package.

Some fun facts from the speech:

  • The Multiplier Effect of government spending is $1.50 for every dollar of fiscal stimulus; if we had a bailout package of $850 billion, the effect on the real economy would be $1.275 trillion.
  • GDP needs to grow by 2% in order to eliminate 1% of unemployment; the real effect of the stimulus package would be around 9% of our GDP (1.275/14), eliminating 4.5% unemployment…Krugman estimates that unemployment will be around 9-10% by year end. Therefore, on the surface, this stimulus would set the U.S. off into a world of full employment, but we must consider how quickly we can spend the money (which believe it or not, is the hard part).
  • Finally, we’veĀ  concluded that infrastructure would be one of the best targets of fiscal spending (besides technology). However, estimates show that there are only $150 billion worth of “shovel ready” jobs, or projects which can be started in 6 months (at the earliest). This means we will have to get creative in our methods of spending – green collar jobs, fix bridges, retrofit buildings, upgrade our electrical grid from AC to DC (which would allow our electrical lines to go under water, allowing us to build wind farms in the middle of the Atlantic Ocean).

Hat-tip to Paul for the video.

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