Krugman Did Cause the Housing Bubble
Here is Paul Krugman from his blog trying to deny that he was a persistent advocate for the housing bubble and below that are quotes from him just prior to the bubble taking off. ht Benjamin Lee
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"And I was on the grassy knoll, too"
One of the funny aspects of being a somewhat, um, forceful writer is that I'm regularly accused of all sorts of villainy. I was personally responsible for the demise of Enron; my nonexistent son worked for Hillary; etc.. The latest seems to be that I called for the creation of a housing bubble.
Paul Krugman
=================================================
German Interview, undated
http://www.pkarchive.org/global/welt.html
"During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?"
May 2, 2001
http://www.pkarchive.org/column/5201.html
I've always favored the let-bygones-be-bygones view over the crime-and-punishment view. That is, I've always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly -- that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum. That was why I, like many others, was frustrated at the smallish cut at the last Federal Open Market Committee meeting: I was pretty sure that Alan Greenspan had the tools to prevent a disastrous recession, but worried that he might be getting behind the curve.
However, let's give credit where credit is due: Mr. Greenspan has cut rates since then. And while some of us may have been urging him to move even faster, the Fed's four interest-rate cuts since the slowdown became apparent represent an unusually aggressive response by historical standards. It's still not clear that Mr. Greenspan has caught up with the curve -- let's have at least one more rate cut, please -- but the interest-rate cuts do, cross your fingers, seem to be having an effect.
If we succeed in avoiding recession, this will mark a big win for let- bygones-be-bygones, and a big loss for crime-and-punishment. And that will be very good news not just for this business cycle, but for business cycles to come.
July 18, 2001
http://www.pkarchive.org/economy/ML071801.html
"KRUGMAN: I think frankly it's got to be -- business investment is not going to be the driving force in this recovery. It has to come from things like housing, things that have not been (UNINTELLIGIBLE).
DOBBS: We see, Paul, housing at near record levels, we see automobile purchases near record levels. The consumer is still very much in this economy. Can he or she -- or I should say he and she, can they bring back this economy?
KRUGMAN: Well, as far as the arithmetic goes, yes, it is possible. Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don't know"
August 8^th 2001
http://www.pkarchive.org/economy/ML082201.html
"KRUGMAN: I'm a little depressed. You know, inventories, probably that's over, the inventory slump. But you look at the things that could drive a recovery, business investment, nothing happening. Housing, long-term rates haven't fallen enough to produce a boom there. The trade balance is going to get worst before it gets better because the dollar is still very strong. It's not a happy picture."
August 14, 2001
http://www.pkarchive.org/column/81401.html
"Consumers, who already have low savings and high debt, probably can't contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery.... But there has been a peculiar disconnect between Fed policy and the financial variables that affect housing and trade. Housing demand depends on long-term rather than short-term interest rates -- and though the Fed has cut short rates from 6.5 to 3.75 percent since the beginning of the year, the 10-year rate is slightly higher than it was on Jan. 1.... Sooner or later, of course, investors will realize that 2001 isn't 1998. When they do, mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place.
October 7, 2001
http://www.pkarchive.org/economy/ML071801.html
"Post-terror nerves aside, what mainly ails the U.S. economy is too much of a good thing. During the bubble years businesses overspent on capital equipment; the resulting overhang of excess capacity is a drag on investment, and hence a drag on the economy as a whole.
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. But it seems inevitable that there will also be a fiscal stimulus package"
Dec 28, 2001
http://www.pkarchive.org/column/122801.html
"The good news about the U.S. economy is that it fell into recession, but it didn't fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed's dramatic interest rate cuts helped keep housing strong even as business investment plunged."
Comments (61)
Jonathan Finegold Catalán
The problem is that since his blog practices in censorship people will continue to listen to the trash that comes out of his mouth.
Published: June 17, 2009 11:50 AM
AJ Witoslawski
This shouldn't be surprising at all. Krugman is one of those economists who has consistently been pushing for disastrous policies like single payer health care and increased financial regulation.
Published: June 17, 2009 11:51 AM
Greg Ransom
Paul Krugman lying.
Now that's never happened before.
Published: June 17, 2009 11:57 AM
Daniel C
I'm surprised this one, cited on LRC a couple of days ago, wasn't included (I guess it came a little later than where Mr. Thorton was researching?):
NYT Editorial, August 2nd, 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.
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html
Published: June 17, 2009 12:19 PM
ShedPlant
Daniel C, indeed, that quotation is key.
Published: June 17, 2009 12:20 PM
Ben
Mark, you are the man. Everyone, spread the word about these quotes.
Published: June 17, 2009 1:01 PM
Chris
Hell, I sent him an e-mail yesterday pointing him back to that article. Did anyone else do this?
Published: June 17, 2009 1:30 PM
Ben
Guys, you need to send this out to every blog you can. The previous quote in 2002 went viral the past 2 days getting published in nearly 100 blogs. Krugman actually had to address it in his blog today writing off criticism saying that he wasn't advocating policies to stimulate housing. This entire set of quotes shows that he's lying. Lets try to make this one reach 100 blogs as well.
Published: June 17, 2009 1:35 PM
J Cortez
Ben, it's already happening. I've seen this and other past Krugman quotes on several other weblogs. I expect he'll wait a week before writing the usual dissembling article to cover his past remarks.
Published: June 17, 2009 1:36 PM
Michael Orlowski
Someone should post those quotes with the highlighted "main phrases" on his blog.
Published: June 17, 2009 1:38 PM
Ben
J Cortez, there is nothing he can write to cover those remarks. He set himself up this morning by saying he didn't advocate policies to stimulate housing. He clearly did, evidenced by all the previous quotes provided. He can lie his way out of his 2002 article. He can't lie his way out of the 2001 ones.
As far is it appearing on several other blogs, it was probably me. I've sent them to every blog I know and I posted them in a lot of comments sections. The 2002 quote on Greenspan spread like wildfire. If enough people take the 5 minutes required to post these on message boards or other blogs, this one can go viral as well. I've never seen Krugman take this much heat.
Published: June 17, 2009 2:02 PM
Ben
J Cortez, there is nothing he can write to cover those remarks. He set himself up this morning by saying he didn't advocate policies to stimulate housing. He clearly did, evidenced by all the previous quotes provided. He can lie his way out of his 2002 article. He can't lie his way out of the 2001 ones.
As far is it appearing on several other blogs, it was probably me. I've sent them to every blog I know and I posted them in a lot of comments sections. The 2002 quote on Greenspan spread like wildfire. If enough people take the 5 minutes required to post these on message boards or other blogs, this one can go viral as well. I've never seen Krugman take this much heat.
Published: June 17, 2009 2:07 PM
Joe O.
"Low interest rates, which promote spending on housing and other durable goods, are the main answer."
Compound that with the Fed's other, extremely loose moentary policies like those enacted by Greenspan and you get Krugman's fix all snake oil. All you need to do is print money and everything will be fine. Just ask Zimbabwe.
Published: June 17, 2009 2:07 PM
Mark Thornton
In addition to posting it and emailing to friends and Keynesians, it would be worthwhile printing out a few copies to hand out.
Published: June 17, 2009 2:29 PM
Ho Pin
Krugman totally owned. Superb job, Mark, thanks for these sweet moments ¡¡¡
Published: June 17, 2009 2:45 PM
dewind
He should, at the very least, own up to it. Now he is driving his [mainstream] credibility into the ground.
Published: June 17, 2009 3:12 PM
DixieFlatline
CC your emails to the NYT ombudsman.
Published: June 17, 2009 3:30 PM
John Seiler
The Mises Institute should institute its own prize as a counterpart to the Nobel Prize in Economics: The Krugman Booby Prize for Worst Economist.
Published: June 17, 2009 3:33 PM
bad news bear(er)
hate to burst your loss-of-Krugman-Kredibility bubbles, but he'll just respond to these claims that government did TOO much stimulating, and that he was advocating a mild stimulus. You see, when you base your reasoning on nothing but unicorns and pixie dust, you can claim the intellectually bankrupt position of knowing exactly the amount of stimulus something needs, exactly in the middle of a bubble that nobody else can see, in exactly the right form.
sorry, but if Krugman is to be Krugman (and why shouldn't he?) he'll just crap out a bunch of words, assemble them into sentences, group them into paragraphs, and post the steaming pile to his blog or better yet to his dead-paper-walking column.
krugman; what a joke
Published: June 17, 2009 3:43 PM
William Anderson
The most important thing to remember is that Paul Krugman is NOT an economist. He is a Keynesian political operative. Nothing more, nothing less.
Published: June 17, 2009 3:44 PM
John Seiler
The monetary amount for the Krugman Booby Prize for Worst Economist (see above) should be $100 trillion Zimbabwean dollars.
Published: June 17, 2009 3:48 PM
Joe S.
Is this a good time to remember that Krugman saw a potential construction boom in the 9-11 attacks?
http://mises.org/freemarket_detail.aspx?control=372
Published: June 17, 2009 4:21 PM
Sean W. Malone
Mark, et al;
I love you guys, and all this stuff needs to be rubbed in Krugman's face every day... BUT please give credit where credit is due:
Reason Magazine: "Dr. Krugman: This Patient Needs More Blood-letting" - Comment by "Ben"
Seriously... The 2002 article was, to my knowledge first dug up by Patrick Semmens of the Ron Paul blog and posted to the article linked above as the very first post. This stuff has flown around the internet 10 times by now, but I encourage EVERYONE to go read the massive comments thread over at Reason - Many of Krugman's minions made it over there and "defended" the man with Ad Homs against Amity Shlaes and others and little else.
Since, dozens of Reason regulars, and staffer Tim Cavanaugh have tried to post responses to Krugman's blog, but as yet (many hours later) nothing but sycophantic stupidity has appeared over at the NY Times blog.
Credit goes to Patrick & Ben - And yes, everyone should share it with everyone they know.
Published: June 17, 2009 4:23 PM
(8?»
Meh,
Discredit Krugman and you'll only create the vacuum required for the creation of his successor.
In other words, at best, all you can do is to turn the memory hole of the NYT into a lynch mob for as long as it takes to disassociate itself from the incoherence that is Krugman. While you may seek to discredit both Krugman and the NYT, in effect you can only validate the credibility of the Times if you pursue Krugman to the point where they "throw him under the bus." You know, "journalistic integrity" and all that.
Call it divide-and-conquer, call it wrestling with pigs, either way, you play, you lose.
Published: June 17, 2009 4:40 PM
Ben
Sean, that was me who commented on that site. I posted the same quotes everywhere I could and personally sent them to Mark and a number of other respectable bloggers. I put the list of quotes together but, to me, credit is irrelevant. I saw an opportunity to expose a bad economist who lies and could care less about getting any credit. The message and the spreading of it is what is important to me. Kudos to Mark for posting it. And he did credit me in the first line of this blog entry.
Published: June 17, 2009 5:14 PM
Sean W. Malone
Ben;
I saw Mark's credit - but further commenters had omitted it and I wanted your hard work to be recognized.
And I know it really doesn't matter who did it - but it's generally important to me to have original work cited whenever & wherever possible. Happened to me recently that someone made a YouTube video of an article I wrote for this very magazine without telling me or asking. I was flattered of course, but I still wanted people to know that the video was my words and not the speaker's.
Also, I now left a comment for the Krugman:
Published: June 17, 2009 5:23 PM
Jack
"PAUL KRUGMAN: Actually, I hadn’t heard that one. He’s saying that we did a lot to try and stop the bubble. Boy, well into this, he kept on denying that there was a bubble. And even when—you know, there’s the famous remark about froth: there might be a little bit of froth in the market. This is the point when it was clear—to me, at least—that we had a full-blown, you know, out-of-control bubble.
So, no, I don’t blame him for the low interest rates. I think that was—the low interest rates were necessary. We had, as we say among my economist friends, a near-Japan experience in the US. We almost slid into a point where—a tailspin that you couldn’t get out of. So the low interest rates were appropriate."
- Krugman 2007.... still saying the housing bubble was a good thing...
Published: June 17, 2009 5:48 PM
Lysander
You guys just don't get Krugman. It's not his fault things got out of control. It's the free market. He's Goldilocks. He didn't want his housing too hot or too cold, just right. Of course only he can determine that.
Published: June 17, 2009 6:03 PM
Ben
I hear ya Sean, but the reality is, I didn't write anything at all. My "work" was 100% consisted of quotes. Lets make sure Paul Krugman gets 100% of the credit (err maybe blame is a better word) for his work.
Published: June 17, 2009 6:19 PM
Bob Weber
IIRC Murray Rothbard (or maybe it was Lew Rockwell) once ironically suggested an Oskar Lange award for Craziest Idea by a "Distinguished" Economist. The award is to be a painting of sliced baloney and strait-jackets against a background of soaring loons. Maybe Krugman should get the award.
Published: June 17, 2009 6:50 PM
Sean W. Malone
Whatever floats the boat Ben :) I just wouldn't be the kind of pedantic fellow I am if I didn't care that people are cited properly.
Published: June 17, 2009 6:51 PM
Karmaisking
There's a massive "fight" on Wikipedia over whether this stuff should be included on Paul Krugman's page. A guy called "Lawrence Khoo" (a neo-Keynesian academic apparently in love with Krugman) is obsessively deleting any mention of this stuff.
Anyone wish to take up the fight? This is the historical record after all, and apparently some Keynesian like to wipe history's slate clean. In other words: engage in base censorship.
I've already been banned from WP so someone else needs to take up the fight on the PK talk page.
Good luck!
Published: June 17, 2009 6:53 PM
Bob Roddis
In this 2005 article, Krugman wrote the following which is totally consistent with his advocacy of a housing bubble in 2002:
"The important point to remember is that the bursting of the stock market bubble hurt lots of people - not just those who bought stocks near their peak. By the summer of 2003, private-sector employment was three million below its 2001 peak. And the job losses would have been much worse if the stock bubble hadn't been quickly replaced with a housing bubble.
So what happens if the housing bubble bursts? It will be the same thing all over again, unless the Fed can find something to take its place. And it's hard to imagine what that might be. After all, the Fed's ability to manage the economy mainly comes from its ability to create booms and busts in the housing market. If housing enters a post-bubble slump, what's left?"
http://www.pkarchive.org/column/052705.html
What's left? Audit the Fed and then abolish it along with the boom bust cycle.
Published: June 17, 2009 7:47 PM
Bob Roddis
One more nail for Krugman - not to be missed.
"jsh" found the following from October 30, 2006 and posted it as a comment to Bill Anderson's "Hair of the Dog" post:
Krugman was asked: Did he [Greenspan] 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?
Krugman replied: 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.
http://krugman.blogs.nytimes.com/2006/10/30/credit-where-credit-is-due/?pagemode=print
http://blog.mises.org/archives/010154.asp#comments
So we now know that the Krugman cure for Fed housing bubbles is "warnings", not higher interest rates.
Published: June 17, 2009 8:13 PM
Sean W. Malone
I just completed a rather lengthy blog on this topic - feel free to link if you like it:
KrugWatch 2009: An Exposed Fraud
Published: June 18, 2009 2:45 AM
Jack
http://www.ronpaulforums.com/showthread.php?t=196004
The original Krugman quote was distributed widely after this RonPaulForums posting on Monday.
RonPaulForums for the win!
Published: June 18, 2009 4:47 AM
Mark Thornton
Ben: Keep up the good work! Mark
Published: June 18, 2009 6:37 AM
Sukrit
This is amazing. It would also be great if Mark Thornton's post could be sent to a few media outlets too. Maybe try Glenn Beck, and the right-wing?
Published: June 18, 2009 9:14 AM
Bob Roddis
A comment by Christopher Peters made it into the comment section of the NYT Krugman blog regarding Krugman's post where he attempts to weasel out of his unambiguous call for a housing bubble. Mr. Peters' link to this Mises.org post (with all of our comments) made it through NYT security:
http://krugman.blogs.nytimes.com/2009/06/17/and-i-was-on-the-grassy-knoll-too/?apage=3#comments
Published: June 18, 2009 9:35 AM
Ben
Awesome piece Sean. It appears we got it to go viral on the blogosphere. I did send it to Beck since he and Krugman had a tuss last week. I'd like to keep the Far Right media out of it as long as possible before Krugman pulls the "right wing" conspiracy charge. The beauty of this is that you don't really need to say or analyze anything. His words alone speak volumes.
Published: June 18, 2009 11:37 AM
Mike
Nice article... I also love the irony of this whole situation. Just a couple months ago when there was the peanut butter salmonella scare, he had the nerve to blame Milton Friedman, for his advice against the FDA (that obviously was never taken). Now, someone blames him for something he did advise, and he freaks out.
Published: June 18, 2009 4:01 PM
Michael Turner
There's no difference between "advocating policies to stimulate housing", and advocating policies that overstimulate it and start a bubble? There's no difference between saying you need to lower interest rates to help stop the economy from shrinking, and recommending keeping interest rates too low for too long? No difference at all?
And to think that, just the other day, I was about to edit the Wikipedia article about Austrian economics, to take out the part where it said it's no longer in mainstream economic thought. That just didn't seem right to me. Now, though, I realize: with silly exaggerations like these, going unquestioned -- nay, being cheered on -- you guys must have really lost some basic critical thinking skills somewhere along the way.
Paul Krugman: "You have to drink water to overcome dehydration."
Paul Krugman after this kind of hackery: "He advocates drinking lethal amounts of water! And FDA, HHS and USDA took orders from him, and made that an official U.S. dietary recommendation for school lunch programs! Pass the word, pass the word!"
Yeah, and he was on the grassy knoll, too. He would have been only, what, 8 years old, but it's possible, right? And he just admitted that had been on the grassy knoll, in a recent blog posting, right?
So he was complicit in the JFK assassination! And admitted it, in writing! Pass the word, pass the word!
What would von Mises made of this kind of sweatily desperate character assassination? Was Murray Rothbard ever so ridiculous? Would they want to be associated with it? Somehow, I think not.
Published: June 18, 2009 11:10 PM
Thinker
Michael Turner
As it happens "advocating policies to stimulate housing" and "advocating policies that overstimulate it and cause a bubble" are the same thing. Any form of non-market stimulus (and there is no other kind) causes a bubble. Additionally, Krugman actually did call for the creation of a housing bubble, see Daniel C's comment.
And for someone complaining about other people's exaggerations, you seem to have no problem with making them yourself.
Published: June 18, 2009 11:57 PM
Jack
Michael Turner, are you able to read? At all?
Look at the quotes Krugman made - he advocated a low interest rate policy which he knew full well would cause a housing bubble.
Published: June 19, 2009 12:06 AM
jpj
Krugman's early advocation of rate cuts to create the housing bubble -- specifically his NYT article from august 2002 -- had also been noted in european online magazines as early as last October and November.
Published: June 19, 2009 3:30 AM
jpj
Krugman's early advocation of rate cuts to create the housing bubble -- specifically his NYT article from august 2002 -- had also been noted in european online magazines as early as last October and November.
Published: June 19, 2009 3:41 AM
Daniel
The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief in the long run they do not increase overall national production but encourage malinvestment.
Published: June 19, 2009 2:48 PM
M Ingelmo
I've just posted a comment on Krugman's blog: basically a link to a video featuring an interview with him. It might interest some of you, since watching Mr. Krugman himself on TV saying certain things, I think it would be rather difficult to deny his "bubble prescription".
Here it goes:
Mr. Krugman,
I don't know if you were on the grassy knoll, too, but you certainly were in Spain in March, chatting with that most fervent of your admirers, Prime Minister Mr. Zapatero, and interviewed in the Spanish public TV channel.
Since these days a video is worth a thousand words, allow me to quote you and say: "guys, watch it for yourselves". The program is about other things, innovation, and in Spanish (sorry), so go straight to the 35 seconds in the interview after minute 2:50. Under the Spanish translation I'm sure you'll be able to hear the English original. Quite enlightening:
"To be honest, a new bubble now would help us out a lot even if we paid for it later.
This is a really good time for a bubble...
There was a headline in a satirical newspaper in the US last summer that said: "The nation demands a new bubble to invest in" And that's pretty much right."
http://www.rtve.es/mediateca/videos/20090502/innovar-para-salir-crisis-informe-semanal/495712.shtml
Not a piece of policy advocacy? Just economic analysis? Will it look like it to all your defenders and commentators here? Personally I am delighted with the words "pay for it later"; are we paying right now for the last one, advocated in 2002, or maybe not enough yet, Mr. Krugman?
If governments follow your "not-a-piece-of-policy-advocacy-just-economic-analysis", (as it seems certain at least with ours), when that new bubble thus inflated eventually bursts, and we are "paying for it" in a few years time, what will you write in your blog then, Mr. Krugman? That you are still regularly accused of all sorts of villainy? Or, quoting zrichellez (63), that it was George Clooney talking on TV?
Published: June 21, 2009 7:19 PM
Jack
"To be honest, a new bubble now would help us out a lot even if we paid for it later.
This is a really good time for a bubble..."
The spanish translation confirms these quotes (it's a bit hard for me to hear Krugman behind the Spanish).
So, this is a direct refutation of Krugman's it was a description, not a prescription' excuse. He really was recommending a bubble explicitly (in addition to implicity via his low interest rate policy) and has now been caught in a lie trying to defend himself.
Published: June 21, 2009 8:02 PM
Jack
I just realized that Krugman's comments from that video are current and not from early 2000s.
That's even scarier - he's recommending another bubble NOW!
He thinks you never have to feel the pain...
Published: June 21, 2009 8:08 PM
Chris W.
"There may be a recession in stock prices, but not anything in the nature of a crash."
--Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
"Stock prices have reached what looks like a permanently high plateau."
--Irving Fisher, Ph.D. in economics, Oct. 17, 1929
Paul Krugman = Irving Fisher + Nobel Prize
Published: June 23, 2009 2:13 AM
Gil
"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929.
"My bad." - Irving Fisher, Ph.D. in economics, Nov. 1, 1929
Published: June 23, 2009 2:36 AM
Chris W.
@Gil: hilarious!!! Here's some more damning stuff which seem to illustrate Krugman's way of thinking:
From http://www.washingtontimes.com/news/2004/nov/22/20041122-095742-3613r/
in response to http://www.pkarchive.org/column/91401.html
"The broken-window fallacy was seen in a column by Princeton University professor Paul Krugman after the terrorist attack on the World Trade Center, 'After the Horror' New York Times (Sept. 14, 2001): 'Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could do some economic good.' He went on to note how rebuilding would stimulate the economy by business investment and job creation.
Again, do the smell test. If Mr. Krugman is right, wouldn't the terrorists have done us a bigger economic favor if they had destroyed buildings in other cities?"
Ouch.
Published: June 23, 2009 3:32 PM
Mike
What I want to know is why John Stewart hasn't had him on to shred him like he's shredded the dudes at CNBC.
Published: June 23, 2009 11:53 PM
Bob Roddis
To Mr. Michael Turner:
What the heck are you doing on Wikipedia defaming the ABCT when you don’t understand it?
You wrote:
“There's no difference between ‘advocating policies to stimulate housing‘, and advocating policies that overstimulate it and start a bubble? There's no difference between saying you need to lower interest rates to help stop the economy from shrinking, and recommending keeping interest rates too low for too long? No difference at all?”
If you mean is there a difference between a smaller amount of fiat money issued and a much larger amount, certainly the larger amount will probably do more damage. However, any fiat money created out of thin air amounts to theft of purchasing power from those holding the existing money to those first receiving the new money due to monetary dilution. That’s an undeniable truism. Further, the creation of fiat money necessarily distorts the capital structure of the economy resulting in malinvestments which must ultimately be liquidated in a bust. Krugman appears to not comprehend either essential ABCT concept and ALWAYS calls for monetary dilution as the primary economic cure for everything. Krugman has been exposed as a dishonest and incompetent dissembler and a partisan hack.
If you don’t understand the malinvestment aspect of the ABCT yet, take a look at Roger Garrison’s excellent power point presentations on the subject:
http://www.auburn.edu/~garriro/ppsus.htm
On a related issue, isn’t it odd that the Keynesians insist that the government create a housing bubble, become hysterical at the ensuing sprawl and then demand draconian global warming taxes to keep it in check? Like Krugman?
Published: June 24, 2009 12:20 PM
Paul
Mark Thornton likes to do thorough research jobs. And we benefit from them.
Published: June 25, 2009 5:12 AM
Chuck
Look what that old socialist Arnold Kling had to say about all this:
http://econlog.econlib.org/archives/2009/06/defending_what.html
Published: July 17, 2009 9:29 PM
Anthony Phinditt
For the Housing issues the points and information you have in the blog will help a lot. Thank you for giving such a site.
Published: July 19, 2009 6:02 AM
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Published: August 1, 2009 5:18 PM
John Papola
Professor Krugman is a pitchman for horribly crude keynesianism. No doubt about it. But it is fair to say he "caused the housing bubble"?
Isn't that about as fair as Milton Friedman claiming that Austrian Business Cycle Theory caused great damage during the depression?
In both cases, there is little evidence the powers controlling policy at the time were paying attention to either Krugman or Mises/Hayek.
Now, given, Bush/Greenspan did do precisely what Paul Krugman was advocating, while Hoover did the opposite of what the Austrians advocated. But I don't know that Bush and the GOP were interested in what "The Conscience of a Liberal" had to say.
They were simply hack keynesians all by themselves, no?
Published: August 4, 2009 5:01 PM
Patrick
I do not think we should be using the title of "Economist" on Paul Krugman. A better title would be "Social Engineer" instead. The only problem with that title would be that it gives engineers a bad name instead of economists. Good engineers, like good economists, look at all of the effects of a change in the system they are attempting to make, something that Paul Krugman is notoriously disinterested in doing. However, the type of unsustainable economics that Mr. Krugman advocates more aptly falls under the category of social engineering through economics advocacy rather than mere economic policy advocacy.
Published: August 15, 2009 4:15 PM