“The last recession officially ended after eight months, but employment didn’t start to recover until 30 months later, so I think we go at least that long this time. If the recession started in January 2008, then that would mean July 2010 is the first month we have anything that feels like a recovery. But I wouldn’t be surprised if it goes longer than that – maybe into 2011” 

“If the Fed responds this time with as much cutting as it did in the last two recessions, we get to zero. And then the problem is, What if that isn’t enough? And there’s a pretty good chance it won’t be.”

“We’re looking at the classic pushing-on-a-string problem, where the Fed can cut, but it’s not clear it does much for the real economy.”

“When the spread gets that big, it suggests that banks are losing trust in each other.”

“We had a first wave more than a year ago, when subprime first began to go. And everyone said that was contained. We had a second wave last August, when things started going to hell. We had a third wave late in the fall, and heroic efforts seemed to bring the problems under control. And now here we go again. This is starting to look like a much more comprehensive financial crisis.”

“It seems to me like every few weeks there’s another $300 billion market I’ve never heard of that has just collapsed.”

“What we’re having looks like a minor-key version of the bank failures in the early 1930s. Now it’s mostly not banks, it’s markets that were serving the function of banks and institutions that were doing banklike stuff, and it’s not as bad – at least so far. But it’s a question. If we were actually having a string of bank failures, then we would know what to do. The government would essentially seize the banks and guarantee the deposits. But what do you do when you have a wave of failures of things like the auction-rate securities market, which was effectively a funny way of doing banking? If you look historically at other financial crises, they typically end up with big government bailouts. But how’s that going to work in this case? We don’t even know who to bail out. And part of the problem is we don’t even know who owes what to whom.” 

—Paul Krugman