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CHETRY: Twenty-eight minutes past the hour. A look at the top stories now. Stock markets around the world soaring overnight. This just a day after the Dow gained 936 points, the biggest point gain ever. Dow futures are also pointing higher again right now. Well, gas is the lowest it's been since last winter. AAA says the national average for a gallon of regular is now $3.16 a gallon. That's down 69 cents in a little under a month. And quick cash and lots of it to save the credit markets. Here's new video of Secretary of the Treasury Henry Paulson. He's arriving at the White House this morning. President Bush is going to be speaking just about a half an hour from now about this plan. The first part of it being unveiled to invest $250 billion in the nation's biggest banks. The money would come from the $700 billion bailout plan approved by Congress.
ROBERTS: It's being called the Treasury Department's boldest move yet. In just half an hour, the president is expected to announce a $250 billion plan to unfreeze credit markets by infusing cash directly into U.S. banks. So is it the right move to get the economy back on track? And joining me now from Princeton, New Jersey, "New York Times" columnist and Princeton University Economics professor, Paul Krugman. Just yesterday, Krugman was awarded the Nobel Prize in economics for his work on international trade. Paul, good to see you. Congratulations. Got to be a great feeling.
PAUL KRUGMAN, "NEW YORK TIMES" COLUMNIST: It's still - I'm just stunned. It hasn't sunk in yet.
ROBERTS: This bailout plan, let's get your take on this first of all. This $250 billion to recapitalize banks with the first trench of money going to the number of biggest banks in America. Is this finally going to be the plan that works?
KRUGMAN: Well, it is what the doctor ordered. It's what a lot of economists have been calling for when Britain did this last week, announced a similar plan. Many of us cheered saying that's the way to go. A lot of the European countries have agreed to do something like this and now the United States is doing it. So, you know, no one is sure. This is - these are crazy and scary times. But this is our best shot at this point so it's the right thing.
ROBERTS: Right. You know, a fellow Nobel Prize winner from 1987, Robert Solos said he's as puzzled as anyone by what's going on. Is there a chance that what we could be seeing right now is just a little bit of feel good euphoria that a plan is coming and then at the same it will last for a day or two and then the markets start to go back down again?
KRUGMAN: This has happened before. You might remember when the initial now discarded $700 billion plan was announced there was a brief surge in the markets and then people thought about it and said I don't understand how this is going to work. This one is a lot better thought out. But look I'm waiting. The stock market is not your gauge. The stock market is not going to tell you whether this works. You got to look at the credit markets. So far there are just hints that they are starting to unfreeze. But as of this morning I can't say, point to a number and say there's the evidence that this plan has already worked.
ROBERTS: You were warning about all of this back in 2005. You wrote "these days Americans make a living by selling each other's houses paid for with money paid for by China. One way or another, the economy will eventually eliminate both imbalances." It seems to be doing but looking forward, Paul, does America fundamentally need to change the way that it operates? We're a country and a nation of individuals that operate on credit. Do we have to start living within our means?
KRUGMAN: Well, more so. I mean, you know, we're always going to have credit and a market economy needs a lot of credit. That's the lubricant but we have gone crazy with it. We lived as individuals beyond our means. We lived as a country beyond our means. And we've also sort of forgotten. We did forget for a while that there's risk. There was just enormous amount of stuff was taken on faith. People borrowed up to the hilt and leveraged themselves. Sorry about the jargon and that has come crashing down. So we got return to a more sober way of living, a more sober way of living, a more sober way of doing business.
ROBERTS: Right. You have been quite critical over the course of your career both as an economist and a journalist of the Bush administration. Some people said you crossed the line from economics to politics. You have inflamed your critics for it. Donald Luskin, chief investment officer of Trend Macrolytics says of you, "he is not in the same category as John Maynard Keynes, he is in the same category as Oprah Winfrey. To give this Nobel Peace Prize to him is to dishonor the Nobel Prize." What do you say to such criticism?
KRUGMAN: Look, I mean, there's politics. There were a lot of people who were outraged that I would criticized Bush when he had an 80 percent approval rating. Everybody thought he was wonderful and I said, you know this guy is not actually wonderful, he's pretty bad. And you know, at this point I guess about 80 percent of the public agrees with me on that. You know, but the prize is not about that. Right, the prize was about analytical work in economics that is looking back at it is astonishingly non-political.
ROBERTS: Well, congratulations on your win. I mean, to win a Nobel Prize, it's quite an accomplishment.
KRUGMAN: It's amazing. Thank you.
ROBERTS: Paul Krugman of Princeton University and "the New York Times," thanks for joining us this morning. Appreciate it.
KIRAN CHETRY, CNN, ANCHOR: Well, Gerri Willis is working her blog. She's answering your money questions for us this morning. A lot of people are wondering in these turbulent times what the right move is. So what are they asking you this morning.
Originally broadcast, 10.14.08