The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.(via Arnold Kling--but see Kling's partial defense of Krugman)
Friday, June 19, 2009
Column Krugman Wishes He Never Published
This may be the first NOfP post bobn enjoys completely. But I'll bet Paul Krugman wishes he hadn't said this in a 2002 New York Times piece:
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2 comments:
One word:
"Bubbleheads".
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Per Kling, Krugman was joking. 2 of the 3 Kling articles you've linked have been very interesting BTW.
In any case, I disagree with Krugman's obsession with ever greater fiscal stimulus (based on borrowed money), and most especially his idiocy in treating the S.S. "Trust Fund" as some sort of real asset. Dean Baker fails on the latter issue as well.
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