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Krugman: "To fight this recession - Greenspan needs to create a housing bubble"

nytimes.com

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Re: Krugman: "To fight this recession - Greenspan needs to create a housing bubble"

#11

Post by DenisM »

davetufts wrote: post #7

While that 2002 is probably Krugman's most blatant call for a housing "bubble". Mises.org just compiled a list of 7 other pre-2002 Krugman calls for lowering interest to stimulate home buying: http://blog.mises.org/archives/010153.asp Like another commenter on this page states, Krugman didn't think a housing bubble was a good idea...but it was necessary to avoid a recession. Still, why not just deal with the conseque…

Wicked. So, can we predict the future (policy actions) based on his current words then?

Re: Krugman: "To fight this recession - Greenspan needs to create a housing bubble"

#12

Post by msluyter »

Although I don't think this is relevant to HN, I think I should point out that the title is somewhat misleading. Here's the quote in context:

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.

Re: Krugman: "To fight this recession - Greenspan needs to create a housing bubble"

#13

Post by profgubler »

ajross wrote: post #5
aolnerd wrote: post #2

it's analysis, not an advocacy for a bubble http://krugman.blogs.nytimes.com/2009/06/17/and-i-was-on-the...

Exactly. Not sure how this bit of "gotcha" suddenly popped up in so many places, but it's missing the point. If you read the article, Krugman isn't saying that a housing bubble is a good idea at all. What he's saying, in essence, is that the only way to avoid a recession (again, this was in 2002) was for Greenspan and the Fed to kick off a housing bubble to sustain consumer spending. And, by implication, that that wa…

Krugman is not to fault for the recession I agree. But he is still advocating the theory of creating a new bubble to keep us from the effects of a previous bubble. I would have more respect for him if he had a solution to reign in the bubble he said the US had to create to fight of the recession.

Re: Krugman: "To fight this recession - Greenspan needs to create a housing bubble"

#15

Post by grandalf »

grandalf wrote: post #8
davetufts wrote: post #7

While that 2002 is probably Krugman's most blatant call for a housing "bubble". Mises.org just compiled a list of 7 other pre-2002 Krugman calls for lowering interest to stimulate home buying: http://blog.mises.org/archives/010153.asp Like another commenter on this page states, Krugman didn't think a housing bubble was a good idea...but it was necessary to avoid a recession. Still, why not just deal with the conseque…

I keep wondering what bubble they will create next to offset the burst of the housing bubble... any guesses? I am thinking it will either be another housing bubble (housing starts are already up 17% this quarter) or maybe a green energy bubble?

not sure why this was modded down. The bubble was due to perverse incentives to invest in housing debt (massive mortgage interest deductions, implicit underwriting of fannie/freddie, etc.)

Based on many quotes that are starting to surface from Paul Krugman, there were a lot of serious economists who thought that creating massive incentives for investment in the housing sector was a good idea:

http://blog.mises.org/archives/010153.asp

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