\u201cWe could say that the US economy in 2025 was schizoid,\u201d Krugman wrote. \u201cOn the one hand Donald Trump abruptly reversed 90 years of U.S. trade policy, breaking all our international agreements, and pushed tariffs to levels not seen since the 1930s. Worse, the tariffs keep changing unpredictably.\u201d<\/p>\n
\u201cThis uncertainty is clearly bad for business and is depressing the economy,\u201c he continued. \u201dOn the other hand, there has simultaneously been a huge boom in AI-related investment, which is boosting the economy.\u201d<\/p>\n
Krugman pointed out how the AI investment boom shares a lot of similarities with the tech boom of the late 1990s\u2014\u201ca boom that turned out to be a huge bubble,\u201d he wrote. <\/p>\n
He went on to highlight some unusual market behavior surrounding AI-related stocks\u2014primarily, how they shot back up quickly following a period of decline. Krugman theorizes this is likely due to predictions that the Federal Reserve would cut its rates next month.<\/p>\n
\u201cAnalyst chatter about supposed causes of stock market swings should always be taken with many grains of salt,\u201d Krugman said. \u201cBut it\u2019s clear that this surge was catalyzed by remarks by Fed officials which the market interpreted as making a cut in the Fed Funds rate next month more likely.\u201d<\/p>\n
Krugman warned that Trump would not be able to lead the U.S. through this unpredictable economy.<\/p>\n
![\"Magnificent](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/11\/NCH4MDJ7NBEKRL7BXTAN56FVBQ.jpg\")
Bloomberg’s Magnificent 7 Total Return Index measures the stock prices of seven widely traded tech companies, offering a glimpse into broader market trends. Bloomberg <\/p>\n
\u201cSo as doubts about AI creep in, I\u2019m hearing growing chatter to the effect that the Fed can and should save the industry,\u201d Krugman wrote. \u201cBut the lesson from the last big tech bubble is that it can\u2019t. In fact, I have doubts about whether the Fed can head off a broader recession if the tech boom collapses \u2014 but that\u2019s a topic for a future post.”<\/p>\n
\u201cMy point is that if you\u2019re worried about an AI bubble, don\u2019t expect Jerome Powell or his Trump-appointed successor \u2014rumors are <\/a>not<\/a> encouraging<\/a>\u2014 to come to the rescue,\u201c Krugman added. \u201dThey can\u2019t.”<\/p>\n","protected":false},"excerpt":{"rendered":"Nobel Prize\u2013winning economist Paul Krugman warned that the economy is on thin ice\u2014thanks to President Donald Trump\u2019s wildly…\n","protected":false},"author":3,"featured_media":407282,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,77,79,1597,162824,2175,67,132,68],"class_list":{"0":"post-407281","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-donald-j-trump","10":"tag-economy","11":"tag-federal-reserve","12":"tag-paul-krugman","13":"tag-tariffs","14":"tag-united-states","15":"tag-unitedstates","16":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115619145434219186","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/407281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=407281"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/407281\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/407282"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=407281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=407281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=407281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}