Krugman Asked for Housing Bubble

posted by Nima

June 17, 2009 · Posted in General Economics 

In 2002 Paul Krugman said we needed a housing bubble. It is not surprising that he would espouse such nonsense, but just in case there are still people out there listening to this guy, please consider Dubya’s Double Dip?:

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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