Paul Krugman – Menace to Society

I have never trusted Paul Krugman, New York Times contributor and Nobel Prize winning economist. He is decidedly partisan in his opinions and I have a problem with that. A true economist should not give his political leanings any weight in his study and analysis of economics. But let’s set that aside for a moment. Because now I have an even bigger reason to distrust and disdain Mr. Krugman.

From Paul Krugman’s op-ed in the New York Times, August 2, 2002 [emphasis added]:

A few months ago the vast majority of business economists mocked concerns about a ”double dip,” a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I’ve repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever.

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.

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So how do you like your housing bubble now, Mr. Krugman? I bet there are several million recently unemployed people who’d like to tell you a thing or two about what a great idea you had there.

Karl Denninger picks up this story and expands upon it quite nicely in his Market Ticker blog today. Krugman thought a housing bubble would be just the ticket, but it only happened because Alan Greenspan and Ben Bernanke agreed.

Paul Krugman is a menace to society along with Greenspan, Bernanke, Paulson and Geithner. If you are smart, you’ll never believe a word any of them says ever again.

Explore posts in the same categories: Economy

4 Comments on “Paul Krugman – Menace to Society”

  1. David Says:

    If you read his whole article it does not sound like Krugman was advocating for a housing bubble (notice that he was even quoting someone else on that) but that he was agreeing that without it we would have a double-dip recession – and he was right. In fact, what we have now is the natural result of trying to manage the economy to prevent the double dip that the market demanded for a true correction. Few is any of our partisan commentators (Krugman included) are brave enough to quit meddling and let the markets reset wheret hey need to be.

    • dejuan Says:

      David, actually, he was. Here’s an article in 2001, before this most recent quote where he says:

      “In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.”

      • James Wilson Says:

        Nice cherry-picking. The very next sentence says, “But it seems inevitable that there will also be a fiscal stimulus package.” The rest of the piece continues on that subject.

  2. marvin Says:

    This is a blog. Any idiot can make a blog. Obviously ’13oclock’ is one of these. Go figure.

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