Bailout

Perhaps the most depressing exchange of this morning's conference -- and believe me, there were plenty to choose from -- was between Goldman Sachs's Jan Hatzius and Paul Krugman.

Hatzius, 41, said his two scenarios for the U.S. economy were ?pretty bad? and ?very bad.?

The economy will grow between 1 percent and 2 percent through early next year, with unemployment drifting up ?to somewhere around 10 percent, maybe a little above 10 percent,? he said. ... ?It?s going to take many years before you get back to anything approaching full unemployment, and 2014 is very likely too early,? said Hatzius.

We see two main scenarios for the economy over the next 6-9 months?a fairly bad one in which the economy grows at a 1½%-2% rate through the middle of next year and the unemployment rate rises moderately to 10%, and a very bad one in which the economy returns to an outright recession. There is not much probability of a significantly better outcome.

Between the two scenarios, the fairly bad one?slow growth, rising unemployment, but no outright recession?has significantly higher probability ... However, the recession scenario also has significant probability (we still think about 25%-30%).

Full post as published by Calculated Risk on October 06, 2010 (boomark / email).