I type this post with the hand that just shook Paul Krugman's hand...
Krugram is in town to give a talk as part of the Bryan Lecture Series. He also gave a lecture on the current economic crisis this morning at UNCG and then went out to lunch with faculty from the Economics Department.
The talk this morning began with a discussion of how the trends in world output in the current crisis initially mirrored those from the late 1920s but subsequently recovered (unlike the earlier decline). Krugman then moved on to discuss how the failure of the financial system, especially the "shadow banking system," contributed to the crisis, how the crisis was similar to Japan's lost decade, how we managed to avoid even worse outcomes, and how hard the recovery is likely to be.
The talk followed a lot of what Krugman has written in his columns. For instance, he discussed the important roles of deposit insurance, conventional monetary policy, and automatic fiscal stabilizers. There was a lot of emphasis on the limits of monetary policy--the liquidity trap--and how the Fed has adopted some unconventional policies, such as buying commercial paper in addition to government securities. Although Krugman also predicted a slow employment recovery, he didn't spend a lot of time talking about a follow-on stimulus package. He did, however, discuss how difficult it would be to return to healthy employment numbers with the policy tools that were currently being deployed.
Lunch afterward was an absolute blast. With all the questions being fired at him, it was a wonder that he got any time to eat.
All-in-all, it was the sort of day economists really enjoy.