MOSCOW, July 2 (RIA Novosti) - Well-known U.S. economist Joseph Stiglitz on Thursday said he hoped the worst phase of the global crisis was over but noted that the recession would continue to be felt for a while.
"The worst aspects of the crisis are over. People are talking about a return to positive, yet very low, growth. And in terms of what economists call a recession, how economists define a recession is two quarters or more of negative growth. And once the growth turns positive, officially the recession is over," said Stiglitz, winner of the Nobel Memorial Prize in Economic Sciences (2001) and former senior vice president and chief economist of the World Bank.
"But for most citizens, for most businesses, that's not what they mean by recession. What they mean by a recession is high levels of unemployment, persistent unemployment, excess capacity, insufficient demand for their products. And that aspect is likely to continue for an extended period of time, both in the United States and the rest of the world," he said during a Moscow-Manchester video conference.
"And the reason for it is very simple. The source of growth for the global economy in the years preceding 2007 was the almighty American consumer. Americans were consuming beyond their income. We had a bubble, we had a housing bubble, sustained by vast regulation, and loose monetary policy," he said.
"People where taking hundreds of billions of dollars out of their homes. But the bubble is broken. Savings of the United States went down to zero. It is now going up. Good thing for the long run, but in the short run, a real problem," the professor at Britain's University of Manchester said.