Paul Krugman in 2002 after the moderately severe 2001 US contraction:
“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”.
Err, yes Paul.
HT JL.
Harry,
This was written about by Sinclair Davidson at Catallaxy with the same ignorance and had to be commented with mud on face with which you will have to do when you get to the context.
This is so old I am surprised you haven’t heard the whole tale
Mr DeLacy,
I am sensitive to issues of misrepresentation so I will cite the relevant paragraphs:
“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.
Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman’s crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging”.
Where have I misrepresented Paul Krugman?
Read the WHOLE column Harry.
He was being ironic.
The original person who wrote this his realised his error. This was done and buried some time ago as anyone who read Mr Krugman’s blog would have known
Even if you have represented Krugman correctly, Harry (and that’s debatable), so what?
A well known economist’s attempt at forecasting events turned out to be wrong. Got any more news?
I love the way the devotional left come to the spirited defence of their heroes even when they are silly. Bob Dylan said “Don’t follow leaders, watch your parking metres”. Sound advice.
Of course the comments by Krugman are relevant to the ongoing arguments he is making for for an even stronger US expansion.
I don’t see the irony despite the humouress tone in places. He was concerned about a ‘double dip’ recession and wanted a big expansion.
Harry, I’m no idolater of Krugman, and I doubt NPK is either. Krugman’s a damn sight smarter than most, but like everybody else he’s often wrong; reality is a very treacherous and perverse place for even the smartest of humans.
BTW, Harry, did you hold the view in 2002 that Greenspan should engineer a double-dip recession for the US then and there rather than risk a future boom and bust? At least Krugman actually saw that the alternative to recession was indeed a housing bubble.
He just didn’t foresee that the combination of globalised finance and flawed financial engineering would turn a regulation housing bust (leading in the normal course of events to a localised and probably weak US recession) into a potential global depression. That’s the real lesson, IMO, from all this – that local asset bubbles can have global effects, and that therefore financial regulation is a global, not local, issue. That’s something Keynes – an even smarter man than Krugman – did understand.
Whoops, sorry about the HTML tags.
Harry,
As I said previously Sinclair Davidson at Catalaxxy had to climb down after the original author of the criticism agreed he had made a mistake.
This happened ages ago.
One thing that we can be sure of, Homer is not Paul Krugman