Paul Krugman loves to remind people that he predicted the housing bubble collapse before others did. (Actually, I think he is confusing himself with Peter Schiff, but I digress.) Well, maybe there is another reason why The Great One did such a good self-described job in “predicting” the bubble: He called for the government to create one.
Now, in Krugman’s defense, he did not demand that the Fed create a new housing bubble; he just suggested it as a good idea to jumpstart more consumption. He wrote back in 2002:
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.
This, my friends, is better known in my home state of Tennessee as the “hair of the dog,” which is what some of the Good Ole Boys take after a night of guzzling down lots of “Lynchburg Lemonade.” Since the stock market was in the toilet, what better way of trying to “stimulate” consumption without the economy producing anything than to do it in the housing market!
The problem here is not withKrugman’s recommendations, as awful and stupid as they were (and still are). The problem is more basic; Krugman’s Keynesian “economics” is stupid, wrong-headed, and as crude a “theory” as the economics profession could create.
To his “credit,” Krugman actually admits that he wrote that Really Stupid Comment. Furthermore, he does not exactly disown it:
Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.
Uh, sorry. It was advocacy. Bubbles exist because of easy credit and easy money, and Krugman already is on the record as claiming that inflation will give an economy “traction,” which is Keynesian-speak for “stimulating” spending.
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Bill, for policy advocacy from Krugman, please see Mark Thornton’s most recent blog entry on Mises…
Addressing some of those quotes prior to his idiot 2002 quote shows exactly that he was advocating policies to stimulate housing (which he denied today in his blog).
Adding a few more tidbits such as those would make this blog entry much more effective.
This reminds me of a great quote from Alan Kay (of computer science fame): The best way to predict the future is to invent it.
Sounds like he was in favor of what he was ‘describing’:
http://krugman.blogs.nytimes.com/2006/10/30/credit-where-credit-is-due/?pagemode=print
Neeraj Mehra, Amritsar, India: Mr. Greenspan has done a disservice to the nation by creating the housing boom. As a layman-observer, that’s the lingering thought I’ve had. Your article reaffirms it.
The question I have is this: Did he do the right thing — acting morally by engineering a housing boom, more as a bridge loan, until something else showed up at the horizon to shore up the economy — because he didn’t have a choice, or did he undertake a path of mere political expediency? And, that’s a question that’s nagging me for a while.
Would appreciate it if you could shed some light.
Paul Krugman: As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing. But by late 2004 he should have seen the danger signs and warned against what was happening; such a warning could have taken the place of rising interest rates. He didn’t, and he left a terrible mess for Ben Bernanke.
Economic Numbskulls
Tuesday, June 16, 2009
Krugman And Bernanke Are Strange Fellows.
The Nobel Laureate for Wackonomics is invited to speak and he write columns but his disgrace just continues to accumulate. He and Bernanke are similarly odd in the way they can lie and weave into their lies their perverted version of Keynesianism and then either listen to their own voices or read their own writings and get pleasure from it.
So narrow is their view that to them all the world is nothing compared to themselves. These two are very good examples of the psychological condition of ego-driven interventionism and ego-driven interpretation that has gone so far into that satanic world that extreme narcissism is all that remains. Theirs is a psychotic state, an extreme depravity, and near to the most vulgar of all conditions for a human being, that is: ego-consumed.
Bruce,
That’s a perfect description of a rare personality disorder that should be termed “perverted Keynesianism” (acute perverted masturbatory self-love which immolates all those around it):
http://mises.org/etexts/keynestheman.pdf
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