August 10th, 2009
01:40 PM GMT
Nobel laureate Paul Krugman is a famous man and particularly in Malaysia's political circles.
During the Asian financial crisis a decade ago, the American economist stunned most Western observers when he suggested that capital controls could be a viable antidote to a financial meltdown.
But that is exactly what Malaysia's Prime Minister Mahathir Mohamad had concluded as well. Mahathir slapped capital controls on his country's financial flows to stop international speculators dead in their tracks.
His decision was controversial at the time, but many of his critics now concede that Mahathir's tactic helped bolster Malaysia's economy rather than hurt it. Krugman gets a lot of kudos here in Kuala Lumpur, too.
So how does Krugman suggest you track this global financial crisis?
1. Keep an eye on jobs. "We can have a technical recovery where GDP is growing or industrial production is growing." He told me, "But that's not going to matter for most people." He wants to see countries worldwide adding jobs before he's convinced the economy is recovering.
2. Be wary of banks and oil. Oil prices are hovering around $70/barrel during an unprecedented economic downturn. "That's telling you that we've got a lot of pressure on oil supplies," Krugman said. "And if the world economy starts to come back, oil prices will probably come up a lot, and that's a big brake on the recovery."
3. Consider working in health care. Banking... not so much. "Everybody's got real second thoughts about whether what's good for the trading floor is good for the economy," he said. Trading floors are going to get "simpler" and "a lot more boring."
Veteran policymakers in Malaysia might think that would be a good thing, too.
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