Stiglitz says probability of U.S. recession 'very high'

Nobel-prize winning economist Joseph Stiglitz said the chances of the U.S. economy going back into recession are “very high.” “The unemployment situation in the U.S. is very severe and very probably going to get worse,” Stiglitz told reporters today at a conference in Lindau, Germany. “There's a very high probability we'll go into double dip.” Claims for U.S. unemployment benefits unexpectedly rose 5,000 to 417,000 in the week ended Aug. 20, Labor Department figures showed today. The U.S. unemployment rate is 9.1 percent. Stiglitz said calls by policy makers to engage in deficit- cutting austerity measures were heading in “exactly the wrong direction.” “The most important way to address the deficit is to get America back to work, to get the economy back to full employment,” Stiglitz said at an annual gathering of Nobel Prize-winning economists. “Austerity is going to get us predictably into trouble. Spend the money on investments, and those investments will lead to higher growth.” Stiglitz, a professor of economics at Columbia University, also argued that countries in the euro area including Germany should reverse their budget-cutting drives or risk falling back into recession. “If Germany and other countries which have the capacity to engage in expansionary activity would do it, that would help those parts of Europe where they face constraints,” he said. --Bloomberg News--